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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: UncleBigs who wrote (49411)1/11/2006 2:00:09 AM
From: John Vosilla  Read Replies (1) of 110194
 
"It's possible that the dollar craters, import price inflation takes off and interest rates move substantially higher.

If that happened, our economy would completely seize up and we would have a debt collapse. It's hard to completely think through a scenario where we get high unemployment, deflating asset prices, high interest rates (caused by low dollar), inflating commodities (and import price inflation) and debt liquidation (credit contraction)."

A nice summary. Construction grounding to a halt will slow down increase in supply. Also costs to reproduce existing property, plant and equipment goes up dramatically that in part offsets asset collapse from the initial debt liquidation. In the 70's stagflation we had two brutal downturns but by the end of the next upturn prices were always much higher.. That happens in part due to consumers rushing in to buy today because prices will be higher next week. Perhaps like folks the past few years in this insane coastal housing bubble?
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