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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Crimson Ghost who wrote (26972)2/23/2005 5:05:09 PM
From: Jim Willie CB  Read Replies (1) of 110194
 
the Fed's choices: kill the financial asset bubbles
(with higher short rates, flatter yield curve)
or CONTINUE killing the real economy, as it has done since 2001
(with lower USDollar and higher cost strucutre universally)

I have been calling it "Sophie's Choice"
since it is more deadly choice than a mere "Catch 22"

the big HUH has been that long rates have not risen
I think it is a big mistake to conclude it is ALL due to Asian trade surplus recycle
no way imho
it is a key signal that new US$ monetary expansion has gone to stupid destinations
like household debt, room additions, vacations, lifestyle
and to mortgages for overpriced homes
VERY LITTLE HAS GONE TO US CORP BUSINESS EXPANSION, JOB CREATION

the less than stupid destination has been commodity speculation
which hurts all profit margins and household budgets

imho secular deflation has been greatly aided by the US Fed Reflation initiative

ONE CANNOT LEAVE OUT THE OTHER MASSIVE CYCLE
WE PRINT MONEY OR EXTEND CREDIT TO PURCHASE ASIAN GOODS
THEY TAKE SURPLUSES AND OVER-BUILD FACTORIES
ASIAN FINISHED GOODS HIT OUR SHORES
THE USA MIGHT SEE SOME RISING PRICES, BUT WE ARE NOT IN CONTROL
OUR EXPORTED INFLATION RETURNS TO THE USA AS A DEFLATIONARY FORCE
E.G. LITTLE PRICING POWER, LOST CONTROL OF PRICING, EXPORTED JOBS, LOST INCOME, DOMESTIC FIRMS LIQUIDATE OUTPUT

the secular deflation story is not well understood
it is almost totally disregarded, yet incredibly powerful
secular deflation is a natural phenomenon in response
monetary inflation is the human reaction in distressed desperation after the species realizes "MASSIVE FUCHUP"

/ jim
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