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Here is a picture of the Fed's expectations should we re-enter recession and watch asset values of stocks and housing diminish, accompanied by higher unemployment and damaged corporate earnings growth. The Fed would not have required a second stress-test for banks unless the Fed considered it likely that the economies of the world were going to put additional stress on the banking system.

If housing continues to decay, consider the effect on banking in the US and on the Fed's own holdings of mortgage-related toxic loans.

Reader's familiar with my ideas will be aware that my prediction for a bottoming in housing prices is 2019. My accompanying diagram exhibits these following ideas:

Midnight/Winter: 1911, 1947, 1983, 2019: Sap in the Tree of Life is vitalizing the Root-Structure of the tree, life closest to the bottom, closest to the earth. This is a Bottom. The Sap is vitalizing the bottom of the tree because there is no life in the top of the tree. Temperature is cold. This corresponds to the historic time of the Dark Age: imbalance between Reason and Religion; Reason in disgrace. Moon worship at its most advanced.

Dawn/Spring: Sap begins to rise up the tree during the expansion, vitalizing the trunk and the leaves as it rises. As the sap rises, the economy expands. Temperature is warm. This corresponds to the historic time of the Renaissance Era: balance between Myth and Reason, Religion and Science. Love of humanity. Building of the Perfect City of God. Sun-Moon worship balanced: worship of Mercury -- Michael the Archangel.

Noon/Summer: 1929, 1965, 2001, 2037: Sap in the Tree of Life is vitalizing the fruit at the top of the tree. This is the goal of creation, to create fruit. In civilization this corresponds to the creation of individuals, cities of learning and trade, energy foci for the transfer and sharing of wealth, knowledge, and the arts of civilization. Temperature is hot. This corresponds to the historic time of Classicism and Empire: adoration of Man; imbalance with Science dominating, myth in disgrace. Man considers himself God: "Master of the Universe". Crimes of greed, abuse of power, hubris. Sun worship at its most advanced.

Dust/Autumn: Sap has turned back down the tree as the contraction begins, abandoning the fruit at the top of the tree, which is now rotten and worthless. This corresponds to the historic time of the Romantic Era: hatred of human civilization, technology, cities; a return to nature, to the Mother. Moon-Sun worship balanced: Sun as Jesus Christ.

Note: Rising Sap, the Inflation Cycle, is the Tree of Life. Falling Sap, the Deflation Cycles, is the Tree of Knowledge. One needs both. We deconstruct the world during the Deflation Cyles so we can build a better model of the same during the next Inflation Cycle, the construction phase. We dream at Night when we become during the Day.

Michael J. Clark

Hanoi Vietnam

5 July 2012