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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: UncleBigs who wrote (62007)5/26/2006 5:04:40 AM
From: Mike Johnston  Read Replies (1) of 110194
 
With fools like Bernanke et al at the top, the economic weakness will be treated the same way it has been treated in the past: printing more money.

How can the dollar go higher under that scenario ?

The economic weakness is not starting now, it has been with us for a while with low or negative real growth, high inflation and erosion of living standards.
Inflationary boom cannot be confused with a fundamentally sound and strong economy.

And liquidity trap will be of a different nature. The purchasing power of money is and will decline faster than they are able to print it.
So as the Fed will be rapidly increasing the money supply, the actual buying power of that money supply against real goods and services will be going down even faster, collapsing the economy with it.
And that will be a liquidity trap, not of not enough but too much liquidity.

Look for the dollar to lose 50% of its value, gold north of $1000.
If bond yields go down, it will be because of unconventional measures like massive monetization pegging long term rates or mortgages. If that happens look for the dollar to lose 99% of its value and then being replaced.

Nothing that i have seen or heard recently from the likes of Bernanke and the army of economic "spin doctors" indicates to me, that the outcome will be different.
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