Wednesday, July 13, 2005

"Stresses and Strains"

This commentator believes that the economic imbalances will eventually result in a bursting of the bubble.


“We have been through this many times before, most recently in the early 1990s, when hundreds of banks went belly-up, requiring a taxpayer bailout of $150 billion to protect depositors. Just five years ago, we saw the stock market bubble burst, wiping out vast sums of wealth. Both incidents resulted from a tight Fed policy, came about unexpectedly and while many experts told us economic fundamentals were sound.

I believe there are many stresses and strains in our financial system right now due to the housing bubble, Fed tightening, large budget deficits and international financial imbalances. We might survive a threat from one, but not all. Sooner or later, there will be a correction.


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