Dude59

http://market-ticker.denninger.net/

2 Comments

    • Are Central Banks Out of Their Minds? [view article]
      "Although lower house prices and losses in mortgage backed securities cannot be avoided, these measures by central banks has and will continue to temper the decline. "
      Unfortunately, you are correct that the decline in house prices must continue until the average house in a region costs 3 to 4 time the average income. The second part of your thesis is flawed, as delaying the recognition of this will not improve the situation. You only have to look to Japan for an example of what happens when losses are not taken, and bailouts prevent the removal of bankrupt institutions.

      We are facing a situation where we will see limited or negative global economic growth going forward. With Production (of all types) limited by energy and productivity gains, and less energy per dollar being available, and the cost increasing faster than productivity gains, the net returns will decrease.

      With cost inflation increasing globally, and net returns decreasing, we cannot accept the artificial support of institutions that deserve to fail. Doing so will prevent the emergence of those institutions that might thrive in this new millennium.       Apr 22 01:03 AM
    • The U.S. Dollar and the Limits of Irresponsibility [view article]
      To add to what Gaucho stated above:

      1. Fed funds will not drop below 1.5% at the bottom of this cycle. I believe thaqt this will hold, as lowering the rate is not helping lower mortgage costs, which is the primary drag on the financial system. Unfortunately many more homes will foreclose as house prices reset to the mean, which is 3 to 4 times average incomes.
      2. CPI inflation will not rise above 5% for this cycle. Do YOU believe the CPI Numbers? Well, since the cost of houses will come down another 10 to 25% depending on region, I suspect that this will be counted with enough emphasis to bring the overall inflation rate down, even though it was not counted as moving inflation up previously.
      3. Nominal GDP growth will not drop below 4% for this cycle. Since the CPI deflater to GDP will remain deflated, there is a good chance that this number can also be adjusted.
      4. The US current account deficit will improve, albeit fitfully. This will only happen if Oil is not included.
      5. Total Federal Debt will not grow faster than $600 billion per year. Since it already grew by $500 billion in the first six months of this fiscal year, I would bet that this one will fall also.

      In conclusion, I feel that most of your "Limits of Irresponsibility" will fail, assuming that you look at more than the "Official Government Propaganda", whoops, I meant information.
       Apr 22 12:36 AM
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