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

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From: Tommaso	5/4/2005 2:20:00 PM
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From a link posted by Westpacific on another thread: The Fed will soon face two dreadful options, either course likely initiating the secular decline: a persistent tightening that will cause the system to cascade into deflationary decline or an attempt to fuel the next boom while necessarily fomenting price inflation, driving real short rates deeper into negative territory. The deflationary scenario isn't likely, due to political realities and institutions that have been put in place since the 1930s to circumvent deflation (like the Federal Deposit Insurance Corporation). We can count on the Fed to use all means at its disposal in its role as lender of last resort when time comes, as has been promised by members of the Fed. Hence, we should anticipate a secular decline characterized by price inflation similar to, but worse than, the 1970s. Investors who take a defensive position today (investing in T-bills, TIPS, real assets, including some precious metals, and not paper currencies) will have moved out of harm's way just in time within the secular timeframe whether the worst of the decline begins 6 or 18 months from now. atimes.com

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