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This week’s housing sales data and today’s news of mortgage problems at H&R Block provide further indication of mounting woes for the riskier segment of residential real estate lending. Perhaps this will prove the initial tumult at the periphery that eventually precipitates trouble at the core. As Minsky expounded with respect to short-lived Ponzi financing units: "Feedbacks from revealed financial weakness of some units affect the willingness of bankers and business to debt finance a wide variety of organizations."

And I do appreciate that this is how finance is supposed to function – how it’s functioned in the past and how it will again function some day in the future. But I also recognize how contemporary finance has come to view heightened financial stress as among the best opportunities for "big government" to fashion heightened Financial Sphere "profits" (and Lord knows there’s quite a captive audience). For sometime now, the "feedback from revealed weakness of some units" has not been traditional risk aversion, but instead the willingness to position risk portfolios for a lower cost of funds (reduced "pegged" interest rates) and heightened marketplace liquidity.

To suggest we’re facing considerable crosscurrents is today an understatement. Housing and riskier mortgages are deservedly under the radar screen, while market yields at home and abroad are declining meaningfully. For many sectors, markets, and economies these days demonstrating strong inflationary biases, looser financial conditions are undesirable and likely further destabilizing. To what extent this ongoing Monetary Disorder in the near-term precipitates the emergence of latent U.S. Debt Structure fragility is decidedly unclear. But, in the words of Hyman Minsky, "processes which transform a stable system into an unstable system" – having been nurtured for too many years – now grow only more robust and intransigent.

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