"The U.S. used unusual methods in handling the bursting of the “Financial Mania” of the late 1990s, the one called the “Dot-Com” bubble. Instead of letting the free markets dictate just how low the prices of stocks and other assets would wind up after the bursting of the bubble, the “powers that be” intervened. The Greenspan-led Federal Reserve reduced Fed Funds from 6 ½ % to 1% and started a second bubble, an unbelievable housing bubble. They attempted to stop home prices from declining, and the intervention generated an enormous increase in total debt ($26 trillion to $53 tn). We have discussed in past commentaries the onerous consequences of excess debt on the economy–especially when the excess total debt occurs in the consumer and housing sector. These two sectors are the main drivers of the U.S. economy and, if these sectors’ debt problems are as structural as we believe, the U.S. economy will have a very difficult time recovering any time soon..."
at http://pragcap.com/the-debt-induced-secular-bear-market-continues
at http://pragcap.com/the-debt-induced-secular-bear-market-continues
