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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: NOW who wrote (5383)1/17/2004 6:38:19 PM
From: mishedlo   of 110194
 
""As far as monetary policy is concerned, the Fed has already made it clear that it is prepared to go to extreme lengths in order to prevent the economy from slipping into deflation. If the Fed wants to create inflation,
then it can do so by drowning the financial system in excess dollars. Of course, the dollar would collapse, but that would be part of the reflationary process. An end to the Supercycle would be deflationary, so one way to delay the end would be to create inflation in order to devalue
the burden of outstanding debt.

Up to here, I have no debate
They can postpone but not defeat the deflationary crash.
That is what I have been arguing for months.
They will postpone it by cutting interest rates to zero, just like Japan did. This can go on for years IMO. But the end is the same. A deflationary crash in spite of all attempts to stop it.

Mish
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