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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Joan Osland Graffius who wrote (160995)4/19/2002 5:34:08 PM
From: Mike M2  Read Replies (1) of 436258
 
Joan, don't worry about it we are all doomed! -g- . deflation follows a liquidation of private debt. I think we can all agree that there is a limit as to how much private ( business and consumer ) debt can be serviced and I think AG will find that limit and beyond. It is easier to influence the supply of credit than the demand. At some point the demand for credit will contract- either by choice or necessity - see Japan. The Fed has tipped their hand by floating the notion of buying private debt and stocks - I have thought they might do that but kept my mouth shut until they said it first. I think this will delay the inevitable. I feel that the inflation of credit, financial assets, real estate in some areas has been so great that a retrenchment is inevitable. The inevitable decline in the US $ will certainly cause the price of imports to rise but the decline in US debt fueled consumption will impact global demand so we have to see how this plays out. The US cannot be the credit based engine of global growth indefinitely. Staglflation is possible but I feel that the corrective process of unwinding all the excesses, malinvestment and maladjustments will overpower attempts to reflate. I do expect AGs next attempt to reflate will exceed the post 9/11 injection - he will continue until the dollar tanks. I also expect defense oriented deficit spending in an attempt to keep the economy going. Remember how the price of oil declined when Asia tanked? Many nations need revenue and will increase production of commodities to offset the decline in unit prices. Whatever flation we get there will be TL & EV - that is not a MYTH ! mike ho ho ho
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