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As long as Credit expands at the current rapid pace the consumer will undoubtedly keep spending and asset markets will keep inflating. And as long as the Credit Bubble is sustained U.S. financial assets may appear sufficiently enticing to our foreign Creditors (although they must not be that attractive or foreign central banks wouldn’t have been forced into accumulating about $1 TN of reserves the past year). But this is Ponzi Finance at its most extreme. The U.S. financial sector must now balloon rapidly and incessantly to sustain over-consumption; to maintain inflated real estate and securities values; to support corporate earnings and income growth; and, importantly, to support the ever-growing pyramid of financial sector debt obligations. But as we have been witnessing of late, this kind of Credit system expansion creates only more dollar liquidity to add to the global deluge. If only, in Minsky’s language, "Ponzi Finance Units" could live forever. There will, at some point, be a reversal of flows out of Wall Street "finance" that will likely coincide with a flight from the dollar.

Doug Noland is a market strategist at Prudent Bear Funds. Their website is www.prudentbear.com.