Credit Crisis Turning Corner

In a couple(2) months, the credit crisis will be behind us. That is, if CDS contracts don't unwind and if the bond insurers stay a float with a decent rating. If not, much more pain. This is more likely than not, "as everything that could go wrong has."

FT calls this time and place a "Minsky Moment" after the Wash U professor Hyman Minsky. “A collapse of debt structures and entities in the wake of asset price decay, the breakdown of ‘normal’ banking functions and the active intervention of central banks”. This follows an extraordinary dependence on credit growth in the recent cycle.

Bernake has all but discarded inflation concerns. He will cut rates deeper and faster. 75bps cut signals they don't care - neither do the markets, oil declined today. But a lot can happen in two months in this enviornment. The Fed will do anything it can to avoid a recession, but the fact remains that it is in a tough position as most foreign governments are refusing to buy dollars. Furthermore, this is compounded by the stimulus plan which will double the deficit and make the dollar go lower - deficit = dollar value.

Note: George Soros just came out and said this was the worst market crisis in 60 years. That's WWII. When the next recession happens - americans will be living in a very different country. Already, soros says that "the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy." To China.