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Politics : Stockman Scott's Political Debate Porch
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To: pogbull who wrote (6827)9/20/2002 12:40:41 PM
From: Jim Willie CB  Read Replies (2) of 89467
 
The Inflation Problem, by Steve Saville
20 September, 2002

[Saville makes up for previous lousy thesis on deflation]

321gold.com

four reasons:
- commodities on the rise, dollar in decline
- 20 months of money supply growth working thru system
- Fed will remain in easing mode, esp with debt collapsing
- the bond bubble is spewing money like a fountain

an excerpt:
A fourth reason is that the recent rally in the bond market all but guarantees strong money-supply growth over the next few months. This is because, in the current US 'credit bubble economy', rising bond prices are inflationary in that every substantial fall in long-term interest rates precipitates another surge in the total quantity of mortgage debt. The below chart illustrates this point. The blue line on the chart shows an index designed to reflect the level of mortgage financing/re-financing activity. The green arrows on the chart have been drawn by us to show the direction of US Government bond prices. US home owners/buyers, as a group, will eventually reach a point where they will be unwilling or unable to take on more debt, but that point has clearly not yet arrived. They have responded to the latest bond market rally in the same way that they responded to every bond market rally over the past 7 years - by borrowing more money.
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