If you think the FED can target money specifically at home prices please tell me how, why, and at what price they would do so.
That's your straw man not mine.
My argument is as it has been throughout: The USD is fundamentally flawed due to fiscal irresponsibility. The fact that we require massive amounts of foreign buying of our debt on a daily basis combined with the sheer volume of USD in circulation combined with growing foreign disdain with being held at gunpoint to the question: "If not the USD then what?" has led/is forcing the world to answer that question.
The world's reserve currency is in decline at the same time that that country's Federal Reserve is nearing the end of a massive experiment in asset inflating schemes using the first the easy credit of the IPOs and then to stave off the results of that implosion the easy credit of the mortgage market via low rates and no down and no principal repayments.
I don't know if this has ever happened in ancient times, but it has not happened on this scale ever before and to use the "tried and trusted" homilies of economists who have never faced this type of global event should be done with extreme care.
Economists are fond of creating a view of an economy that "fixes" data so that they can perhaps come to conclusions about the data that isn't "fixed". It works a lot of the time, but it also seems to create a myopic tendency to view the world as if one really could "fix" some of the data.
In this case, the data I refer to is the US economy being "fixed" in that there is no interplay of currencies and competing economic desires regarding currencies. A sort of closed system US economy. But we all know it is not. That is, all who wish to believe it is not anyway.
I have no argument with credit blow-ups in a closed system with a relatively stable currency will lead to higher unemployment, lower costs, less capital investment, and stagnation. It has happened many times that way and those times in the last 100 years or so have been subjected to some exhaustive hashing and rehashing of the influencing factors. I'm OK and always have been with that model.
However, this is an event unfolding with the USD and the US economy of truly historic significance. We are living right smack in the middle of it and have real difficulty grasping that which is occurring. This will not be fully understood for generations, I suspect.
It certainly does not lend itself to simplistic answers.
I have many questions and few of those answers (if any) but I will not simply ignore the outside influences because they don't fit my modelling. In the global community there are too many dollars from too many years of excess printing due to the attempt to really become the world's only currency. Now that a lot of the world has had its confidence in that paradigm shaken, a lot of those dollars are going to be pumping back into the system as they are spent buying commodities and other assets deemed to have less risk.
Those excess dollars, combined with the waning desire to fund US excess consumption, has the possibility of creating a panic to get rid of those dollars. That possibility is non-neglible and, when it occurs, goes from almost not on the horizon to full-fledged currency crisis in unbelievably short amounts of time. How quick did the Thai Baht fail? Then the Ruble become the Rubble? Virtually overnight. With the global interconnectivity being even wider-spread now then it was just a few years ago, it could happen even faster now.
Inflation and hyperinflation is far too much money chasing after goods and services. The blind spot is in thinking we have a lock on measuring where that money is coming from when it happens.
There have been economic meltdowns in this last 50 years that have not resulted in deflation when the credit imploded. It seems to me as though one of the things that those situations had in common was that their currency lost major amounts of its value on the world stage at the same time.
The situation in the US and with the USD looks more similar to those situations to me than it does to the meltdowns in countries with stable currencies.
You have a different view. That's what makes a market.
Timba |
