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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Square_Dealings who wrote (33141)5/25/2005 11:03:31 AM
From: Tommaso  Read Replies (3) of 110194
 
Prechter is an "establishment" of one.

He manages to be simultaneously a contrarian and a complete lunatic, a hard combination to achieve in the middle of a overlapping manias and bubbles. I have his book "Conquer the Crash" in front of me. It gives me pause to see David Tice writing a blurb for the jacket.

I think this must be Mish's favorite bedside book.

Prechter uses charts of commodities from 1929 through 1938 to make his point. He forgets that the dollar was then gold-backed, even though U.S. citizens could not own gold.

Here's one of the more irrational sentences from the book: "Fearful holders of suspect long-term debt far from expiration [i.e. long bonds] could dump their notes and bonds on the market, making prices collapse [i. e. prices of those bonds]. If this were to happen, the net result of an attempt at inflating would be a system-wide reduction in purchasing power of dollar-denominated debt, in other words, a drop in the dollar value of total credit extended, which is deflation." (130)

Well, no, Mr. Prechter. A drop in the dollar value of total credit extended is inflation. The drop in the value of bonds reflects a belief that the dollars in which they are denominated will be worth less in the future because prices are rising. A loss of confidence in the value of money IS inflation.
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