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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (49907)1/16/2006 4:50:34 PM
From: GST  Read Replies (2) of 110194
 
Banana republics don't have deflation. The US has that status by running deficits that now threaten the most basic element of our financial system -- the currency itself. There is no scenario in which unsupportable debts lead to deflation. Japan had the opposite "problem" -- how to deal with massive savings and current account surpluses without having their currency appreciate too far or too fast. China is in the same boat. Your analysis is empty and unrealistic because you assume away the most basic of all points -- we are a debtor nation in a currency trap from which we can no longer escape with the value of the dollar intact. The value of our currency will drive prices for all tradeable goods and services (including financial trade) -- and they will not go down in dollar terms. Your viewpoint has validity only if you assume away the most important driving factors and the global context in which events play out.
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