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Credit Bubble Bulletin: Liquidation is only solution to crisis
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 1 year 347 days ago (atimes.com). Views: 124
Tags: federal reserve housing bubble |
| Related Tags: credit crisis gold inflation wall street economics peter schiff banks |
Basically, the strategy is to substitute government-backed debt for the now discredited Wall Street-backed finance. I’m the first one to admit that this desperate undertaking stopped financial implosion in its tracks. However, the problem with this whole approach - because of our "societal," financial, and policymaking biases - is that our credit system will just be throwing greater amounts of (government-supported) debt on top of already fragile credit structures underpinned largely by home mortgages. Wall Street-backed finance buckled specifically because this (Ponzi finance) debt structure was untenable the day increasing amounts of speculative credit were no longer forthcoming. The underlying inventory of houses doesn’t have the capacity to generate debt service - only the mortgagees taking on greater amounts of debt.
The underlying economic structure is now THE serious issue. The last thing our system needs right now is trillions more mortgage debt, although it would work somewhat to sustain consumption and our services-based bubble economy. The inherent problem with a finance, housing, consumption, and services-dictated economic structure is that it inherently generates excessive debt backed by little of real tangible value or economic wealth-creating capacity. System fragility is unavoidable.
It may appear an economic miracle, but for only as long as increasing amounts of new finance are forthcoming. At the end of the day, one is left with an extremely fragile structure both financially and economically.
Yet as long as Wall Street "alchemy" was capable of creating sufficient "money" to fuel the boom - and the world was content in accumulating (increasingly suspect) dollar claims - our bubble economy structure remained viable. It is, these days, increasingly not viable. The wholesale and open-ended government backing of US mortgage debt - and financial sector liabilities more generally - will prove a decisive blow to already shaken dollar confidence. And it is today’s reality that the massive scope of credit growth necessary to sustain the current bubble structure will correspond to current account deficits and dollar outflows that will prove (as we’re already witnessing) only more destabilizing in markets and real economies around the world.
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