Replies to post #397887 on Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

>>>I have a little scenario too.

All this extra liquidity puts pressure on commodities, and first of all oil. And on the dollar. In turn simultaneously choking the consumer, exporters (due to higher dollar vs other currencies), and domestic producers due to higher energy costs.
That in turn will renew fears of inflation and will force the Fed to continue hiking and long bonds to start selling. Increased interest rates will in turn hit the housing bubble, which will implode taking down the rest of the economy with it.

I think Extra liquidity from the Euro debalce is only accelerating the events, and not delaying them.<<<
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Hi ogm,
Though tending to agree with your scenario's conclusion, I disagree with how you arrived at it seeing as it was/is the massive amount of liquidity that drove the USD down leading to higher commodity prices, including, of course oil.

How do you see extra (more) liquidity now putting pressure on commodities when it was the very catalyst that helped them to skyrocket in the first place?

I'll leave your "Euro debacle" premise alone for now.

[schloss_1]

ogm-

<<...That in turn will renew fears of inflation and will force the Fed to continue hiking and long bonds to start selling. Increased interest rates will in turn hit the housing bubble, which will implode taking down the rest of the economy with it.>>


The only problem with this scenario is that some really smart bond guys--like Bill Gross--see the long bond yielding 3% in five years time. Others on the street have mentioned 3.5%. In any event, that's means that the 10-year will be down around 2.00-2.5% and local taxes will cost people more than their home mortgages [sarcasm intended].

What is more likely I think is that--in a slow, almost imperceptible way--the world overcapapcity will start to take down the economies of the word--beginning with Euroland. Five years from now, I think we all will have entered a serious recession. That will decrease employment and, even with dirt-cheap mortgages, the "free homes gambit" will begin to implode. [The smartest man in the world will be the guy who turns down the offer to be the next Fed boss!]

What I find interesting is that, in 1850, 70% of the population were renters. Today, almost 70% are owners. Debt has been demoratized. However, has the pendulum swung too far to the ownership side of the equation? Is there some number, like 50% or 60%, that will ultimately be realized as a more logical and sustainable number? Time will tell. In fact, the verdict on this may not even come in our lifetimes.

schloss