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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (60311)5/5/2006 9:07:17 AM
From: Mike Johnston  Read Replies (8) of 110194
 
But the big question is, what is going to happen to overvalued assets with the Fed frantically printing money.

There are are more and more signs that the adjustment will occur through a decline in the dollar and high inflation rather than a drop in nominal values.

As far as i am concerned the deflation argument is dead.

I will be wrong if:

1.the Fed comes in with at least one and possibly several emergency 50 basis point increases ( no chance)

or
2.the decline in the dollar turns disorderly causing foreigners to liquidate US assets and causing a big jump in long term rates ( but in this case the Fed would simply monetize the bond market leading to even higher inflation)

or
3. the public wakes up and rejects the dollar turning to barter or foreign currency (short period of hyperinflation followed by deflation)

Under any scenario, except the first one, the dollar will cease to exist at worst within 3-4 years and 10 years at best.
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