YUPPIE SERENADE
According to Austrian economics, the boom or speculative bubble bursts when the credit
expansion ends. If a depression does indeed follow a credit boom, then Champagne Joe,
the typical yuppie with borrowed money in the market and no savings faces a series of
unpleasant events. Here's a possible scenario.

1.The markets fall and Joe gets a margin call. He must sell or come up with more
money. The ensuing bear market wipes out his stock portfolio. The idea that stock
ownership is the same as bank savings is put to rest forever.

2.The sudden market drop slows down the economy. Joe finds his stock options are
worthless and the company he works for is cutting back. Either he or his wife may
lose their job. Family income plummets.

3.Monthly payment on the home mortgage that was refinanced to 100% of value take
a big bite out of family income. The value of Joe's home has now dropped far below
the amount of the mortgage.

4.The price of all imports, including oil, soar upward in price because the dollar has
fallen precipitously. Joe and his family can no longer afford to go shopping at the
mall.

5.Interest rates go through the roof and Joe's variable mortgage floats upward. His
house payment has become unmanageable. Joe struggles to pay off credit card
debt. Borrowing costs are intolerably high, a new car or major purchase is out of the
question.

6.Joe's company files bankruptcy. He takes a job elsewhere at half his prior salary.

7.Joe's home goes into foreclosure. He and his family move in with his sister.

8.Stocks continue to drop relentlessly. Joe's retirement plan is worthless. Now his
family can only afford the bare essentials of life.

9.Joe's wife loses her job. She files for unemployment, but government revenues have
shrunk dramatically and benefits are reduced.

10.Joe suffers from severe depression and spends his days watching the financial
channels where a full-fledged panic unfolds in the stock and bond markets. Joe
watches the dollar collapse and interest rates scream upward as liquidity vanishes.

11.Joe decides to file bankruptcy.

12.Joe turns to his parents for help. Joe's parents, who had all their money with
brokerage houses in money market funds and bond funds find they can't liquidate
their holdings. Failures in commercial paper render money market funds illiquid.
High yield (junk bonds) funds collapse and all holders are trapped, never to get a
penny. Corporate bond funds face massive liquidations and plunging values. Joe's
parents are wiped out.


This isn't the worst of it. There's the potential for even greater failures, a total collapse that
wipes out the wealth of America and leaves the public without help from any source. We are
all at risk.

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According to Austrian economics, the boom or speculative bubble bursts when the credit expansion ends.

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