Posted by Karl Denninger
The Mortgage Bankers Association’s index decreased 4.2 percent in the week ended March 19. The Washington-based group’s refinancing measure declined 7.1 percent, while its purchase gauge rose 2.7 percent.
No more HELOCs, no more pulled-forward demand.
Of course people will try to buy before the housing tax credit expires at the end of April – expect reasonably-strong purchase apps for the next month or so. But then that ends as well, following The Fed’s MBS purchase expiration.
This all adds up to no credit expansion.
We have no evidence of employment expansion of note either.
So…. where is it that durable economic growth is going to come from again? Government can continue to spend $1.5 trillion a year more than it did prior to 2007 on an indefinite forward basis to prop up GDP?
That’s the bet being made today in the markets. If you agree with it, you should be long equities or even more importantly, be long in the credit markets. After all, this fantastic expansion will allow businesses (and even sovereigns) to continue to service their debts.
If, on the other hand, you can’t find a greater sucker who believes in the magical money fairy on an indefinite forward basis…..
* Without credit creation or demand for debt no money is being created. Every dollar created only exists due to demand for debt/credit. This my friends, is not inflation. This is a deflationary credit collapse.