but the Fed doesn't have to hike for rates to go up. As the dollar falls foreigners would most likely stop buying or start selling treasuries and converting to something else
OK assuming you are correct pray tell exactly what are they going to buy?
Euros?
Yen?
Think back to February. Europe was bitching to high heavens with the Euro at 1.30. In fact they threatened to intervene if the Euro got any stronger.
The YEN?
Are you seriously proposing Japan would stand for that or do it themselves? So... You tell me just what are they going to do with all those US$ if they chose to sell them? In fact, how much will it cost them if there is a mass exodus?
Finally all you inflationists stumble on this point. Do you or do you not see a housing slump coming up? If so, what happens to demand for furniture, grass seed, carpet, lumber, housing prices, roofing tiles, kitchen sinks, appliances, etc etc etc?
Someone please answer that question. Are house prices going to go up forever? Will there or will there not be a DRAMATIC drop in money supply and/or willingness to lend if there is a housing slump?
What happens to trade jobs, building jobs, appliance jobs, need for those appliances? What happens to capacity? All it takes and I mean ALL it takes to start a deflationary crash is a slump in housing.
Do you have China still producing goods in that environment? Goods for who? Who needs them. What demand is there outside the USA? Show me that demand please.
Now IF you believe in a housing slump, you better well believe in deflation cause it is 100% guaranteed. Of course if you think house prices are going to keep rising, that Greenspan can defeat a K-winter, that loan demand is infinite, that China can keep producing goods that no one wants (or that there is infinite demand for in the USA), then yes there will be hyper-inflation.
Now, please be serious here.
Which scenario do you really think is more likely.
Mish |
