1970s and now(mannfm11)

I think the 1970's were an income tax bracket creep, spiralinggovernment spending, international lending bubble. Reagan came in andcut off the income tax to the point that the deficit went out ofcontrol and they had to curtail spending. The international debt gamewent from lucrative to bust with all the major lenders threatened withinsolvency and the whole game slowed down. People were on trends backthen too. I have an idea that a lot of games can go on as long as theexcesses don't catch up with them. The Greenspan game carried on untilthe tech bubble burst and he started the housing bubble. The problemhere is the US is now the country in trouble on the international debtscene, no so much because the government itself is insolvent (TheFederal government is one of the better positioned governments as faras financial position in those around the world), but because theprivate sector is overladen in debt. I think Volker let debt priceitself and it priced itself to the point that the game going on had tocease. Even though there is a lot of talk about the Fed, 2 yearsecurities are under 2%. The market is talking, not the Fed. The 90 dayt-bills are around 2.25%. The Fed is behind the curve and I don'tbelieve the world is trying to beat the Fed to the punch inanticipation. I think the willingness to lend to risky borrowers hascollapsed and as it goes forward, so have the programs of the riskyborrowers. No buying houses, no going out on a limb for long term piein the sky deals, less speculation. The entire world is a bubble andeverything that has a price is just as likely to collapse as thesub-prime debt. I am looking at the phone companies, which in normaltimes are screaming buys. I have not investigated their debt positionsthough and when it comes to eating, basic cable beats beans and beansbeat any cable at all. Forget two telephones, forget the internet,forget text messages for the kids on the cellphones. Look for a battlefor market share between these guys and price cutting in a fallingdemand market. I get the idea we see an 8% dividend that is slice to 5%before this game is done. 2.5% on T doesn't look that great and defaultis not out of the question if the debt is as high as I suspect it mightbe.

I don't believe the markets are as responsive to thegovernment short term as many would like to think. the market runs thegovernment and since the 1980's, the effects of the banks in lendinghas decline to a fraction of what it was then. Entities have learnedhow to dance without the banks, ala the 1920's. The problems we haveright now aren't so much excessive lending or demand for debt as thefact that the banks have had to take a lot of stuff back on theirbalance sheets and in essence fund the loans themselves instead ofusing the commercial paper outlet. That is how I am reading theexplosion in bank loans since July. In this case, there has been a backlash of liquidity because in essence they haven't really createdanything except shifting the liabilities. The back log of unmarketablestuff they possess is absolutely amazing and the more I read the moreamazed I am that I even see a credit card application in the mail, muchless 4 or 5 a week. That last bastion of fee generation, the Visa carddiscount fee to the retailer on everyday usage of small accounts isabout they can risk now. I bet people with a backlog of credit carddebt don't qualify.