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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (20095)	10/17/2004 2:41:19 PM
From: russwinter	Read Replies (1) of 110194

I think you totally ignore the question of what functions as Money (in this case the USD) and Real Value. If the USD is ravaged and wrecked, then that will be highly inflationary regardless of the presence of a housing Bust, or a weak economy. Even if the USD is just "lower" that will still be inflationary in it's impact, as I don't think you can argue that it will then buy MORE goods and services, if nobody really wishes to receive Dollars from you. Indeed a weak US economy will contribute even more to weakened or ravaged Money (the USD). The reason for that is that Money (USD) will no longer be widely accepted as Real Value, it's just script with no substantial backing, with confidence shattered. That is especially the case if the Wizards react to the downturn (which I agree is coming) with more money creation. More money creation in this downturn will kill the USD as Money and there is no worse scenario than that. If the USD has no demand, or has been greatly diminished, then what worth would a bunch USD Treasury or Agency Notes have in real purchasing power terms? Would rational people (other than money printing Asain CBs for the time being), accept 3.3% interest for a 5 year Treasury issued in a wrecked currency, from a country with a busted economy? That's what I keep talking about, and once again Mises lays it out pretty well I think. It appears to me you have just skipped or refused to read over his points, instead trying to use an argument about lower demand for economic goods as really mattering much with a diminished currency? Are you arguing that more money creation, will ADD to the value of the Dollar? Is too few or scarce Dollars (or Yen or Yuan) really the problem with the world economy?

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