Yep. But they can keep doing what they are doing without
serious consequences as long as the rest of the World fears
the coming deflation. Once the foreigners shift their fear
towards the depreciation of assets parked in USD, it's all
over. The Fed can keep rates low and print the way they want,
but that will only result in no hyperinflation as long as
there is someone actually soaking up every dollar they
print,
i.e., deflation-fearing Asians. Japan, obviously, fears
deflation the most, after spending 13 years in a financial
hole. But they spent a long time there. Maybe, it's time to
come out?
Once the foreign fear for assets parked in USD appears, it's
all over, Fed or not Fed. It will be Mr. Market then, not
the Fed, who determines the direction for the economy.
If they print more, they will get more inflation, with
strongly negative real rates. Who will want to buy the bonds
then?
And, if they keep the rates low, banks will simply borrow
$ and park them, say, in Swiss Francs, or in Pork Bellies,
or gold, causing more of the same. They will use the low
rates to short the dollar. The Fed will be forced to
raise then, by Mr. Market. Cause if they don't, the dollar
will collapse, and they wind up with hyperinflation.
I think we are pretty close to that - the massive exit of
foreign $$$. Although, I don't know - maybe, they are
masachists and enjoy losing money -g- |
