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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Haim R. Branisteanu who wrote (3919)12/26/2003 4:21:06 PM
From: Joan Osland Graffius  Read Replies (3) of 110194
 
Haim.

>> It is amazing how some people are locking themselves in some theories and ignoring the dynamics that modernization and with it the shrinking of business cycle brings.

Maybe it is different this time.<g>

My thoughts on an economic system that invests a large amount of capital in non productive assets must experience a deflationary period as this capital must be destroyed. Today’s technology is different from technology improvements in previous times, for example from the railroad technology boom, "but" the capital destruction occurred where non productive assets were capitalized during that period of time.

It is true we now have CB's that can print money each and every day of the week to fill the void as capital is destroyed. The issue is will the banks or institutions receiving the CB’s currency be willing to loan this money to clients . We do have a modern day example called Japan, as they have been slow to destroy the capital of non producing assets and they continue to experience a deflationary period.

I am not saying I am right and certainly can not see in the future, but there is someone on the other side of these bankruptcies that have occurred during the last 3 years and I suspect the new debt that is being generated today is not AAA type of debt that will have a high probability to be free of default.

My bottom line is this country has more than normal debt that will not be serviced and we are going to go through a few years of destruction of capital, which should cause a monetary deflationary period.
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