Wimpey (George) - The UKs Leading Housebuilder

There is an interesting commentary by Paul McCulley in John Maudlin's E-mail "Outside the Box" received today.

This week's letter is by good friend Paul McCulley, Managing Director of PIMCO. About once a year he puts together an economic debate between his favorite friend and family pet rabbit, Morgan Le Fay. It always presents a very readable look at global economics and a forecast of what could be ahead.

My Friday letter, Thoughts from the Frontline, included a graph that looked at GDP growth and mortgage equity withdrawals (MEW) and Paul explores what could happen if MEWs come to an end, or at least slow down. McCulley once again takes a look at Bretton Woods II, the housing marketing in the US and what might lead to a slowdown in the economy for 2006.

This is an important piece to help you in your understanding of the issues surrounding the debt, trade and housing bubbles. I am going to touch on a few of his ideas next Saturday in my weekly letter, particularly the quote from around the middle of this essay that has his rabbit asking the following question (MLF throughout are the initials for Morgan Le Fay:

"MLF: So, the housing bubble, or whatever you want to call it, ain't America's fault, but rather the Emerging World's fault?

"PM: No, Morgan, it isn't anybody's fault; it just is. When the Emerging World decided to shift from being a net user to a net provider of savings, those savings had to go somewhere, they had to finance something. Otherwise, the entire world would have fallen into a liquidity trap, triggering a global depression."

Read this when you have some time to think about it. In a few weeks I will be putting together my forecast for next year and I am on the lookout for opinions, like McCulley's, that can help us think Outside the Box.

- John Mauldin

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