Efforts to reflate the economies of the U.S. and Britain are running into one potentially major problem; the bond market.
The Great Debate
— James Saft is a Reuters columnist. The opinions expressed are his own —
When prophetic long time bears turn a bit cuddly, it is usually best to take notice. A real estate maven who rejoices in the “nom-de-blog” of Professor Piggington has now, after five years of correctly shouting bubble, labelled San Diego housing prices “reasonable” based on the latest available housing data.
The shadow banking system in Europe isn’t so much dead as being kept on life support by banks and central banks in what amounts to a desperate but risky attempt to avoid the reckoning.
Banks in the U.S. face a new source of write-downs and failures in the coming year as loans made to developers to finance residential and commercial property development rapidly go bad.
Rather than vainly trying to refloat the shadow banking system, the U.S. would be better off grappling with the inevitable ultimate solution — debt destruction and inflation.