Stability In The Markets We Need Is Not Happening

THE STABILITY IN FINANCIAL MARKETS we needed, as I have previously posted, is not happening.  One thing is certain, instability will continue.  This is true because the big mortgage losses are still ahead of us.  The Pay Option ARMs resets will be in the billions in California in 2012.  Foreclosures will hit their peak then.

One thing that will not occur is something similar to the Great Depression when deflation and the money supply collapses the economy.  The opposite is runaway inflation do in part to a meltdown in the dollar.

There is a technical term for this condition.  There is the Edge of Chaos, using Chaos Theory, where the economy normally works.  Going beyond this boundary area of normal gradients of change there is Chaos.  A better more understandable term is Negative Dynamical Stability.  This occurs where corrections and efforts to bring about stability produce greater instability, in wave of increasing amplitude.  Should Negative Dynamical Stability continue the structure eventually comes apart.  Chaos results.  Then new structures evolve.

It seems now certain that the economy has entered a prolonged period of Negative Dynamical Stability.  Stand by for more negative impacts.