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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Don Lloyd who wrote (136111)11/28/2001 5:58:01 PM
From: patron_anejo_por_favor  Read Replies (1) of 436258
 
<<but when a dollar is held these days the only promise that I see is that its purchasing power will drop by 95% or so every century. Is it really likely that a repatriation of dollars can compete with the inflation of the money supply and the asset bubbles that the FED is able to accomplish all by its lonesome?>>

I think there will be some effect from the "Euroization" of the world's capital...but I think somewhat less than Heinz implies. It all depends on how fast it becomes recognized that the US recovery will not be very robust (if it occurs at all). If a catalyst appears (ie, major derivative fiasco), Heinz's scenario could take hold. In that case a dollar crash would occur, taking it down to 100 or so in no time and boosting inflation to double digitsI agree that the mechanism for the US "failing to make good on its obligations" has been and will continue to be monetary inflation, but it will become noticeable in the FOREX over a gradual length of time, probably 18 months minimum. The real problem will be that those overseas dollars will start to hit the markets about the same time that the Fed decides to quit easing, ie early next year. That means they'll probably have to start pushing rates back up much sooner than they planned. The result: A "double dip" recession, with overt CPI inflation as well on the second dip. The real tell, IMO will be the long and intermediate government bonds...when they start to fall, you'll know the repatriation is underway for real.
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