Tuesday, December 11, 2007
No part of the global system will be immune
"People are going to start feeling much poorer soon, as equity markets fail to perform and incomes feel the pinch of inflation. What we haven't seen is a proper unwinding of the leverage built up, certainly over the past four or five years. When asset prices are ballooning leverage is a wonderful thing, super-powering returns, as witnessed in the UK housing market. But when prices start to fall that leverage acts in a savage downward spiral, wiping out gains on investments that prove as flimsy as the thesis they were based upon."