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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: TobagoJack who wrote (62808)6/6/2006 4:15:21 AM
From: Mike Johnston  Read Replies (2) of 110194
 
And that is exactly what is going to happen. They will talk tough, but do something else, because they have no other choice.

They have no other choice, hawkish talk and manipulated CPI are the only "weapons" they have to try to lower inflation expectations.

And they have to inflate at the same time, because they will fight to death to avoid a nightmare scenario of a recession that would be much wider in scope, deeper and longer than The Great Depression.

They are walking a tight rope, they will try to devalue the dollar and increase money supply without people fleeing the dollar and causing hyperinflation.

IMO they will fail. Either the dollar will collapse or a deflationary depression is imminent.

There will be hell to pay, because when you destroy money, you destroy the foundation of capitalism.
The money has already been destroyed through the real estate bubble, there is no going back.

In the next few months, the Fed that has always claimed that there was no real estate bubble, will come in with a 50 bp emergency cut to contain the damage when it bursts.

Instead , they should be rasing rates all the way to 7-8 % to combat inflation that has reached high single digits.
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