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

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To: Mike Johnston who wrote (51173)	1/24/2006 2:31:16 PM
From: bond_bubble	Read Replies (1) of 110194

Mike, what happens if the inflation continues to soar? Let's say oil goes to 100$. The population gets 0% loan, so they dont have to pay rent/interest. Instead, they spend all the money - causing oil to go to 200$. Now, the industries will start failing, wont they?- as their costs are high? Are you seeing industries being able to pass on the costs to customers? Who will buy these 0% bonds? If FCBs dont and there are no savings in US, it means, essentially, Fed has to print the money. Wont that cause inflation? Ofcourse, if this leads to higher inflation, Fed will increase the interest rates to stop the inflation going higher, wont it? Now, if interest rates go higher people start defaulting right? In other words, you can not assume Fed will support inflation to go to 10%. They will fight that inflation as well. And that causes deflation. And they will try to fight deflation by lowering interest rates!! If there is currency run and it causes inflation, they will ratchet up the interest rate. Do you think Fed wont fight inflation?

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