Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Jim Willie CB who wrote (937)	3/1/2004 7:02:20 PM
From: gregor_us	Read Replies (2) of 116555

I Think We Need To Probe Further What Will Happen to the USD at various points throughout a Deflationary period in which tons of debt is being written off. There is probably an arc to this story, which no doubt begins with the USD getting hammered deeply as the Deflationary Black Hole gets going. However, at some point in that cycle, I continue to guess that big contractions in the money supply has some counter-effect. How about the example of Japan? Hasn't Japan had to struggle with a strengthening Yen, at various points in their Lost Decade? Like Japan, you wonder that the first big hit to the Dollar just frightens the hell out of everybody, as it tanks hard and maybe even Washington decides to defend the currency a little. But after a year or two of continued deflationary contraction--maybe the USD begins to strengthen--again, against the wishes of Washington. How about we take the approach that the USD will do everything Washington does not want it to do, as we look out over a 5-7 year severe recession?

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