This could help explain the rally in gold prices despite the ongoing deflationary environment.
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.
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.
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!