Monday, September 15, 2008

Credit Destruction

…is here and in full force. It’s most certainly a deflationary event. The credit markets' tale of wanton and greed of last couple of decades is now ending with a bang and I’m not sure if we have reached the grand finale. Oil is already below $100, peak oil, China etc notwithstanding.
Not incidentally, China, which was growing at a blistering pace of over 10 per cent growth for the last gazillion years has eased its interest rates for the first time.
If we witness wealth and credit destruction of historic proportions, expect commodities to tumble to unimaginably low levels. Most financial institutions in the world have their balance sheets seriously impaired and the banks fighting for their survival don't make loans on overvalued, deprecating assets (aka housing).
If you think the housing sector is about to recover in the US and Canada will escape unscathed, wake up.
Enough said on this early Monday morning. A lot more influential people around the world will chip in much more valuable stuff.
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