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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (5474)	1/19/2004 1:13:54 PM
From: el_gaviero	of 110194

Perhaps you misunderstood me. I am not arguing for imminent inflation. A few weeks ago maybe I would have, but your arguments seem to me to be hard to counter. Yes, for sure, the FED is unlikely to raise rates. To do so would drive a stake through the heart of our over-leveraged economy --- at midnight --- on a crossroads --- under the waning of the moon. I.e., it would finally kill the thing off. Perhaps I oversimplify, but looks to me as if you are arguing for a classic Keynesian liquidity trap, in which funds abound but nobody wants to borrow, and prices fall so everybody waits until tomorrow to buy, and bankruptcies reduce money supply faster than central bankers are able to increase it. I thought Bernanke’s speech --- “I have a printing press” --- was no more than a pretext for inflation masking as a fear of deflation. But maybe I’m wrong. If the possibility of a liquidity trap exists, then strong measures would be justified. I don’t know. I don’t know. You have stretched my mind a bit on these matters (no easy task) and I’m appreciative.

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