Bond Outlook [by bridport & cie, February 1st 2006]
| The end of January led to a slew of commentaries on Greenspan's departure and his legacy, but they have brought nothing new: yes, he kept the economy going though interest rates drops, but has left behind huge and unsustainable deficits and a housing bubble waiting to burst. We find symbolism in the start of the Enron trial coinciding with Greenspan's departure: a price for excess has to be paid in both cases. |
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| Last week we reviewed Harvard Professor Warren's analysis of the precariousness of America's middle class, a theme addressed a few days later by John Mauldin in his weekly letter. This week we again turn to academic research, this time by the Levy Institute, which addresses what we have long considered the internal fault line in the US economy, and which will probably act before the external fault line (Asian support for the USD) in forcing re-balancing. |
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| www.levy.org/default.asp?view=publications_view&pubID=108580b2346 |
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| The unsustainability of household spending beyond earnings is widely acknowledged, but ignored. |