For me, the best car speakers are neither too heavy on the bass nor too heavy on the treble….

I base my pessimism on what forward looking indicators are showing including falling interest rates. The demand for money is falling which indicates decreased economic activity. I think the Fed is too tight because the front month Eurodollar futures is 95.570 which is an interest rate of 4.43%. This is the interest rate at which banks outside of the US lend to one another and should be higher than the Fed Funds rate. Right now it is 18 basis points lower which is not a lot. The Fed is not being very accommodating probably because of the weak dollar and inflation fears. That leaves them with their scheme to allow banks to use some of their exotic debt (CDOs, etc.) as collateral. That is the real bailout.

Mike, I have been trading treasuries going on 18 years and I have masters in finance. I try and write cogently to the layman and if I have been opaque, I apologize. I am just trying to point out the folly of seeking revenge against the malfeasant borrower when it will only lead to worse economic conditions under which we will all suffer.

Here is the article from Friday about the latest inflation figures so I don’t know what you have but I have the ones from Friday.

I don’t know what will be in the future, so I go with what we have. What we have is the latest GDP figures have growth at 3.6%. I don’t know what you think I am wrong about however the latest figures are what they are.

Then, you go into a rant about how the bubble didn’t end just found a new focus. I have no idea why you bring it up since it has little to do with the discussion.

As for treasury rates, well that depends on when you are talking. They certainly haven’t fallen a quarter of a percent since the rate cut so that seems to be not only a misleading statement but inaccurate as well.

So, at this point I am not sure what you are attempting to prove except how smart you are by claiming that you predicted the real estate crash in 2005. Anyone that worked in mortgages predicted the same thing and earlier because we all saw how ridiculous the mortgages were. That is no great feet again.

Congratulations on pointing out all the obvious problems with the internet bubble about a decade after it happened.

Are you always a condescending jerk? For the record I recognized the housing bubble in February of 2005 and have been writing about ever since. I wasn’t blogging in 1999 but I am a big fan of Bill Fleckenstein who writes for MSN and was writing at Silicon Investor at the time. A lot of people saw the bubble but the mainstream consensus was the same as Greenspan, Glassman, Kudlow et al., that this time it was different.

As for the rest of your post. First, you need not worry since the fed is practicing loose money policy. I wonder why though. Given that GDP is growing at 3.6%, unemployment is 4.6%, and we just had the latest inflation figures and it was growing more than you would like.

Your wrong about inflation.

I suspect you will be wrong about GDP growth and unemployment figures lag growth by at least 6 months so todays unemployment tell you nothing about what will happen next year.

If you are practicing loose money policy right now, I would have to wonder what brought you to that conclusion.

Treasury rates are falling faster than the Fed funds rate which means that the Fed is somewhat tight. That is why the Dow fell 295 points on the day that the Fed cut rates 25 basis points (Dec. 11th).

The bubble did not end in 2001, it just found another focus. The bubble economy will end when the public decides that borrowing money to buy inflated assets is a bad deal and then everything that has been inflated by easy credit, e.g. oil, gold, houses, stocks, non-Treasury bonds, will start to fall. (see Austrian school)

Now if you want to continue debating this that is fine by me but please drop the “you are obviously uninformed” tone from your posts.

Congratulations on pointing out all the obvious problems with the internet bubble about a decade after it happened.

If you claim that prices outstripped “values” in internet stocks, then again you prove you think you know a lot more than you actually know.

Internet stocks had no value beyond the excitement that what they created brought. They had no earnings only deep red, and many times had no none or very little revenues. Thus, there was no valuation to them whatsoever. That was the problem. People were buying hype. Of course, it was irrational exuberance. Every speculative market has irrational exuberance. Figuring it out ten years later is no great feet.

As for the rest of your post. First, you need not worry since the fed is practicing loose money policy. I wonder why though. Given that GDP is growing at 3.6%, unemployment is 4.6%, and we just had the latest inflation figures and it was growing more than you would like. If you are practicing loose money policy right now, I would have to wonder what brought you to that conclusion.

I don’t think it is a conspiracy because there is no shadowy group pulling the strings that caused the internet bubble and the housing bubble. I think it was poor planning by the Fed, in particular Alan Greenspan, who chose to keep growth in the money supply high when it was obvious that it was creating a asset price bubble.

Predicting doom in the undefined future is tricky business so be careful with such statements.

Do you remember Irrational Exuberance? I think I am in pretty good company with Robert Shiller and the many others who recognized that prices had outstripped values in the late 90s.

Now we have seen the same thing happen in the housing market and all we are saying is that this unwinding has the potential to turn into another depression.

Unfortunately, after reading a couple of posts of yours I would be careful in claiming others don’t know what they are talking about.

I sincerely hope I am wrong. I don’t want to see anyone suffer but I would be remiss if I did not point out the danger we are facing. A tight money policy now will be a disaster for the whole country. If this bailout can loosen up the credit markets it is worth a try.

Here is more on why we should be doing everything we can as a nation to keep the credit markets open, ideology be damned.

Let me see all of the things that were supposed to put us into a recession: Katrina, high oil prices, high heating oil, the GWOT, have I left out anything.

Predicting doom in the undefined future is tricky business so be careful with such statements.

If you don’t think the bailout will make much difference why are you if favor of it? Again, you naively think that a bailout will help instead of acting counter productively.

You obviously have some sort of radical view of the way in which our economy and i suppose our currency should work and like most believers of conspiracy theories, you include it into just about everything and in this case the mortgage mess. Even though the two have nothing really to do with each other.

Unfortunately, after reading a couple of posts of yours I would be careful in claiming others don’t know what they are talking about.

I agree that this mortgage mess has significant ramifications, however you are beyond naive if you think legislation and intervention will actually save us.

I have no such illusions. In fact, I think we are going to suffer a very severe recession while these problems work themselves out. I am in favor of a commodity based currency, allowing private companies to issue currency, and/or keeping fiat money but targeting growth in money supply versus what Alan greenspan started which is targeting consumer price inflation.

Mike, I do think there is a very good chance that the credit crunch will spread to affect the innocent so the gov’t can act to mitigate and possibly avoid the worst case. After the crisis is over is the proper time to discuss avoiding the creation of bubbles. An opportunity we missed in 2004 when the housing bubble first became apparent.

I agree that this mortgage mess has significant ramifications, however you are beyond naive if you think legislation and intervention will actually save us. If that were so, socialism would work everywhere it is tried. You are an example of a fair weather capitalist. You are for capitalism until it fails and then you support whatever government intervention is needed so that they sufficiently address the crisis.

That isn’t how capitalism works. Unless people are willing to deal with the bad times during capitalism, we don’t have it period.

You seem to think that allowing people that have no business qualifying for a loan to qualify for it en masse is somehow solving the problem. It isn’t. Rates are determined through sophisticated formula that this legislation totally ignores. In other words, the rates that FHA will be offering will not match the risk profile of the borrowers. This seems to be lost on you.