The Great Conservatives: After the Liquidity Bubble

Martin Hutchinson, author of the book Great Conservatives, looks ahead... to after the excess liquidity has leaked out of the liquidity bubble:

"... The United States and big borrowers of dollars will become unexpectedly weak, with their economies and stock markets faring worse than people predict. Long term interest rates will rise, which Federal Reserve Chairman Ben Bernanke will attempt to counteract by lowering short term rates. However he will find himself unable to do much because of an entirely unanticipated upsurge in inflation. His reassurances to the market that all is for the best in the best of all possible worlds, already utterly fatuous, will finally be seen as such by the wounded and angry denizens of Wall Street, who will ensure, as they face bankruptcy or more likely 20-year jail sentences, that Bernanke will not survive their departure. Needless to say the U.S. housing market, already suffering from its orgy of overbuying in 2001-05, will go into terminal collapse, probably taking Fannie Mae and Freddie Mac with it (oh, one hopes so!) and houses will thereafter be nice and affordable until about 2025.

"Outside the [United States], Britain, so proud of its position at the epicenter of the overblown speculations of world finance, will find its economy in collapse and London house prices dropping by more than half over the next [five] years. Only the Russian mafia, accustomed to stealing their money directly rather than through mere financial manipulation, will remain in London, more or less safe from Vladimir Putin, propping up the West End housing and luxury goods markets to a limited extent by their vulgar excess."

The Daily Reckoning Australia

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