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Twilight Of The Gods

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Despite the journalistic fixation with the term, "sub-prime," we must not allow ourselves to be misled into thinking that the world is going to go into a tailspin solely because of the travails of the odd hundred-thousand poor fools whose painful desire to make a fast buck flipping condos met a none-too-choosy lender with similarly short-sighted motives.

The plain fact is, however, that the laxity of lending and the euphoric rush of freebasing on risk never limited itself to such a low-rent corner of the world, for far more sophisticated financial operators were also all too eager to don their beads and boaters and to join in the Chuck Prince Charleston, for as long as the band was playing.

Hard going but worth it!

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Try this one out - written end of 2002.

The quoted bits are Merv's. In fact they are the most damning bits esapecially when you consider that rates were then DROPPED subsequently.

Merv is a great performer but has been just as reckless with the economy as Greenspan.



‘The central view is that house-price inflation will slow, quite sharply. That's not unprecedented. The last time house prices reached this level, a year later house-price inflation reached into negative territory. That is not the central projection.’

`I wouldn't want to be too carried… there must be enormous uncertainty about this. We have no way of knowing' just when house price growth will slow.’

King went on:

`The real concern that the committee has is what impact house prices are likely to have on consumer spending, in terms of making it more buoyant in the short term and causing a sharper slowdown in the long term. The honest answer is that nobody knows what will happen to house prices. I'm sure whatever happens in the next two years will surprise us.'

Don’t you think it’s so-o refreshing when the people who have the temerity to impose their choice of interest rates on the free market then admit to their utter ignorance of the forces at work in the economy.

Brits not already rushing by now off to the estate agents (what we call realtors) to sell their suburban palaces before they were again plunged into negative equity, were presumably less than reassured by what he went on to say:-

`We would all be happy if the imbalances (in the economy as a whole) that built up in the past four years unwind as gradually as they built up… The chance of that happening is close to zero… that's the central outlook (but) we do look at a rate of growth which is unsustainable.'

Oh! And for the gloomsters who still dread the D-word, here’s what King had to say on the subject of deflation:

`To say there is a general risk of deflation is silly, frankly. There are problems with a divergence in the different sectors of the economy. The fact is that if you want price stability there is always a risk of deflation, but it's a pretty small risk at the moment. We're a long way off the position of having no freedom of action on interest rates.'

Edited by OnlyMe

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