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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: pogohere who wrote (50112)1/18/2006 12:01:55 PM
From: GST  Read Replies (2) of 110194
 
<prices will have to drop>

In a closed economy this is exactly what would happen. But in an open economy the outcome will be determined by our current account position -- and the US is currently running a negative $700 billion balance (and rising). What will drop is our dollar, not prices. What will drop is ability to convince people to take our paper for their goods. What will drop is our "living standards", if that term is taken to mean consumption. What will NOT drop is the price of anything we import, including the cost of borrowing the money from outside the US that finances our current account deficit.
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