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: mishedlo who wrote (13564)	10/17/2004 9:15:47 AM
From: russwinter	Read Replies (3) of 116555

As you my have noticed I tend to frame much of my inflation arguments in real time, as in what's happening today in the real world today. But let me ask you a hypothetical about the impact of a future housing bust, and/or GSE hairball. Why do you think that would necessarily be deflationary, given the easy money cure that you continually see them (CBs) proposing. In fact wouldn't falling asset (home) prices lead to systemic failure of the GSE’s (which may already be failing), leading to a large scale and aggressive bailout via monetization of trillions of $US denominated debt? Worse, this would likely be accompanied by a severe revulsion of $US assets. Therefore, any efforts to intervene by Central Banks would be…that’s right, inflationary for all parties. A deflationary outcome would only occur, if they threw in the towel, did little new monetizing and money printing, and put up a strong goal line defense to defend the integrity of the USD. But at this late stage, even that wouldn't especially be deflationary in my book.

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