This could help explain the rally in gold prices despite the ongoing deflationary environment.
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As David Rosenberg has been pointing out in recent times, the ''bond market rally'' has resulted in mortgage rates remaining near record lows. As a result, the bond market has helped to cushion the slump in the housing market.
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This will make it even more difficult for the fed to raise interest rates in the near future.
All in all the aftermath of a bust of a bubble created by cheap credit takes time to sort out and the adjustment can be painful.
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There is no quick fix, as consumers return to living within their means and go back to age old practices of saving and taking on less debt!
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