we are beginning to see bigger effects from retired debts, defaulted debts, delinquent debts
many cases of home equity debt and refi's covering credit card debt
but that is a net money supply wash
equal new offsets equal retired
with car sales down 35% in October y-o-y,
plenty of reduced incoming debts
the Monetary Futility Index is rising
that is what I call the amount of new money & debt to generate a single dollar in new GDP
Richebacher calculates it as 7.0 now
it was 6.5 in midsummer
it was 5.0 last autumn, I believe
I fully expect this index to hit 10, maybe higher, as we trudge down the same disastrous path as the Weimars did in the 1920's
but the outcome will be so much different, with Asian overproduction and misallocated resources left & right across the globe
like a stall in an airplane, the engine cannot take on continued pressure for fuel supply
flow to the engine is interrupted
less fuel flows
sis boom bang
we will earn price inflation mixed with price deflation
shrinking corporate profit margins, shredded household budgets
damn, this gonna be fugly
I have been emphasizing two critical absent mechanisms for months now
no monetary mechanism of imminent higher rates to encourage foreign investment in US$, since the Fed is forbidding higher rates, capping rates, monetizing bonds
no industrial mechanism for promoting greater exports abroad, since the industrial base was itself exported, making Snow's overtures to China absolutely and positively tragic and ludicrous
as Noland says...
The Fed and market players apparently believe that the dollar will calmly find some level commensurate with fair value. But low rates and Credit Bubble dynamics dictate dollar devaluation as far as the eye can see. Such dynamics simply beckon for an eventual run on the dollar. And such a scenario would quickly overwhelm global central bankers already with massive dollar holdings they don’t know what to do with. I believe acute dollar vulnerability is here for the duration: A True Paradigm Shift in Global Finance, and certainly not one for the faint of heart.
/ jim |
