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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: sciAticA errAticA who wrote (35041)6/30/2005 12:32:35 AM
From: mishedlo  Read Replies (4) of 110194
 
has yet submitted a cogent, rational thesis for a traditional deflationary scenario atop a chronically, perpetually debased currency.

I violently disagree with that statement.
There is not a single inflationist that can

1) explain Japan in spite of all Japan's attempt to debase their currency including going from the worlds largest creditor at one point to one of the worlds largest debtors. Japan had a national surplus. Now Japan's national debt is 250% of GDP and in spite of that property values in Japan fell for 18 consecutive years with interest rates falling from 8% to 0% along the way. You say deflation can't happen, I say Japan alone proves you wrong!

2) challenge the scenario I previously laid out here:
globaleconomicanalysis.blogspot.com

I will have a new challenge coming out to Puplava tomorrow where I will rip him to shreads one again.

Here is a very small portion of it.....

A key point to remember is that when Greenspan slashed rates to 1% he was bailing out banks not consumers. Corporations owed money to banks as did numerous foreign nations. Greenspan kept rates low enough, long enough to enable corporate balance sheets to be restored and bank loans to corporations to be repaid. Now it is consumers not corporations that are deepest in hock, and the primary creditor is GSEs not banks. That is a huge difference and I find it silly at best to think that money will be dropped from helicopters (or given away in massive quantities) to bail out consumers at the expense of banks and other creditors. Bill Gross does not find the Bernanke Helicopter Drop theory plausible and neither do I.

Here is the nut hyperinflationists need to crack:

1. Falling home prices
2. Falling wages
3. Stagnant employment or rising unemployment
4. Slowing world economy
5. No incentive for the FED to bail out consumers at the expense of banks
6. The K-Cycle is not likely to be defeated by throwing more money at the problem.
7. At some point lenders refuse to lend or borrowers stop borrowing. That time will be at hand when housing plunges. Look at current events in the UK as a prelude for what will happen here.

If you think you can address all of those points in a logical well thought out analysis then be my guest. It is all too easy to sit back and say the US can or will print its way out of it. Yeah right to bail out consumers at the expense of banks? Get real. Please address every point and show me a logical scenario that results in hyperinflation FROM THE ENORMOUS DEBT LEVELS CONSUMERS HAVE, that banks and other creditors would sit thru.
The FED can print but can it force banks to lend or people to borrow?

I challenge you to addresss all of those points in a logical manner.

No one has yet.

Mish
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