PKB - The Doomsday Scenario For The Stock And Housing Bubbles
It was always folly to believe that inflating asset bubbles could solve the structural problems of a post-industrial economy.
The Doomsday Scenario for the stock and housing bubbles is simple: the Fed's magic fails. When dropping interest rates to zero and flooding the financial sector with loose money fail to ignite the economy and reflate the deflating bubbles, punters will realize the Fed's magic only worked the first three times: three bubbles and the game is over.
So, what happens when punters realize there won't be a fourth bubble? They sell. Bids disappear, because who's