I'm not trying to convince you of anything.
My belief is that financial crises appear to cure long term
excesses. The excesses were in the credit market (see title
of this thread), in the stock market (relatively minor),
the housing market, and the currency market. For 20-30
years US could afford to run trade and budget deficits,
without any considerable effect on USD, due to USD
status as the World Reserve Currency. Now, these
cummulative deficits are enormous. Usually, in other countries currency declines arrive when the Trade deficit
surpasses 3% of GDP. In USA, it surpassed 5% when the USD
topped. It is still at this level, which means cummulative
trade deficit is still increasing, not declining.
The coming crisis
ought to correct these imbalances. This means, naturally,
the dollar and bond market crash. BWDIK?
Inflation? CRB shows an increase from 228 to 256 during
the past year. This is unbiased index, which is pretty
much independent of the government statistics. This is
12.3% inflation. And that, regardless of the orchestrated
"war" drop in commodities. Nov. 2001 through Nov. 2002
yearly CRB increase was 23%.
USD declined since Jan 2002 from 121 to 91. This translates
into a 33% inflation from Jan 2002, which is roughly in
line with the CRB increase. The only thing that's not in
line is the government inflation statistics, which shows
inflation levels close to zero. |
