The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: GST who wrote (49012)	1/7/2006 6:08:02 PM
From: UncleBigs	Read Replies (1) of 110194

GST, you might be right about foreigners fleeing when our growth stops but you don't know that for sure. They didn't flee during our last recession. What might mitigate that? 1. Decreased financing needs. If our economy slows, the trade deficit will narrow and our need to finance the current account will drop. 2. If the personal savings rate of Americans climbs above zero, we could fund some of our own deficits. There are 2 legitimate points of view here. One (which I tend to support) is that the real economy lead by housing will bring about the bust (deflationary debt collapse variety). The other point of view is that a currency crisis develops causing interest rates and inflation to skyrocket which in turn causes a bust in the real economy. Either way a bust is the end result but the route toward that bust is very different. I do agree that the Fed is in a very bad situation here and I also agree that the Fed does not have as much flexibility to lower rates in response to an economic slowdown as is generally believed.

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