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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: el_gaviero who wrote (36145)7/16/2005 1:52:42 PM
From: mishedlo  Read Replies (1) of 110194
 
An interesting argument.
But one I mentioned somewhere along the line.
Yes if there is an overthrow of Congress and legislation is passed handing out new money by the powers that be, once that occurrs (the destruction of debt will be complete) and inflation can take off.

That could be the end game years down the road, it is not going to happen quickly or easily.

Those in power now are not going to easily do what it would take. As I 100% for sure mentioned: look at the passage of the bankruptcy reform act as proof.

No doubt the FED will attempt to monetize (as will other nations with the same problems). The questions are

1) Will they do it faster that debt is destroyed in bankruptcies?
2) Will demand for goods and services remain constant? If not, and if the supply of goods exceeds the rate of printing (likely IMO) prices will not rise. There might be more dollars but will there be more dollars relative to the supply of goods and services (ie overcapacity)?

Money supply went up in Japan but it did no good. People had a propensity to save. The US was once a nation of savers, what happens if we see a shift from 0% savings back to 6% savings?

These are things that are going to take time to play out, and once the process starts, the FED is going to have decreasing power over time as the deflationary scenario escalates.

Mish
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