"What is clear now is that this unsustainable effort is likely to come to an end sometime in 2005, just after the elections, regardless of who is President. Given the scale of the money-printing by the Fed and the US Treasury since 2001, it is pre-programmed that the "correction" of the latest Greenspan credit binge will impact the entire global financial and economic system. Some economists fear a new Great Depression like the 1930's. The world today depends on cheap US dollar credit. When US interest rates are finally forced higher, dramatic shocks will hit Europe, Asia and the entire global economy, unlike any seen since the 1930's. Debts that now appear manageable will suddenly become un-payable. Defaults and bankruptcies will spread as they did in the wake of the 1931 Creditanstalt collapse."
"Ever since raising rates, Greenspan has calmed nervous markets by stating that future rises will be ever so gradual. In other words: don't worry, speculators. But if he is to keep the confidence of the large bond markets, he must convince them that he is still vigilant against inflation. That is tough when prices for everything from copper to oil to lumber to soybeans and scrap steel are rising from 50% to 110% over recent months. His only anti-inflation tool is higher interest rates, or promise of same. The longer he fails to raise rates as prices rise, the greater the risk of a dollar crisis, as foreign investors fear the worst, namely that the US economy is in far worse shape than officials admit. The Fed is in a trap.
Yet higher interest rates threaten to explode the trillion dollar home mortgage debt bubble, where home values are estimated to be at least 20% overvalued nationally, or $3 trillion.
When private bond investors such as major pension funds and banks lose confidence in Greenspan's inflation commitment, the only other source of support for low interest rates would be the willingness of Japan and China above all, to pour billions more of their dollars into buying US bonds."
http://www.globalresearch.ca/articles/ENG407A.html
"Ever since raising rates, Greenspan has calmed nervous markets by stating that future rises will be ever so gradual. In other words: don't worry, speculators. But if he is to keep the confidence of the large bond markets, he must convince them that he is still vigilant against inflation. That is tough when prices for everything from copper to oil to lumber to soybeans and scrap steel are rising from 50% to 110% over recent months. His only anti-inflation tool is higher interest rates, or promise of same. The longer he fails to raise rates as prices rise, the greater the risk of a dollar crisis, as foreign investors fear the worst, namely that the US economy is in far worse shape than officials admit. The Fed is in a trap.
Yet higher interest rates threaten to explode the trillion dollar home mortgage debt bubble, where home values are estimated to be at least 20% overvalued nationally, or $3 trillion.
When private bond investors such as major pension funds and banks lose confidence in Greenspan's inflation commitment, the only other source of support for low interest rates would be the willingness of Japan and China above all, to pour billions more of their dollars into buying US bonds."
http://www.globalresearch.ca/articles/ENG407A.html
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