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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (75261)12/12/2006 3:00:31 AM
From: bart13  Read Replies (2) of 110194
 

Our trading partners finance our deficits. We could finance our own deficits but we do not save anything and so must turn to others for credit. Our creditors in Japan and China finance our deficits to keep our economy growing. So long as we grow, they will provide the trade credit we need to buy. The price of what they sell to us is in no small way dependent on the purchasing power of our dollar. The purchasing power of our dollar is dependent on their willingness to finance our deficits. In the event of a slowdown in our economy our deficits will not go away -- indeed they are likely to persist and in some areas like our government deficits they are likely to grow. Even our trade deficit could worsen initially in the event of a slowdown as imported goods and services are cheaper than domestic goods and services.


I could quibble with your other paragraphs, but as far as I can tell any disagreements in them are minimal. And for the record, I'm not invested for an intermediate or longer term deflationary scenario. Disinflation sometime over the next year to 18 months - good probability. But I won't bet the farm.

Anyhow to your points above, I'm assuming you're addressing the how "international trade related imbalances" creates inflation area. I don't at all disagree that Asia and others are doing much of that financing and that the dollar value is very key... but the money they send us has to come from somewhere. Obviously some comes via the payments the US makes for those goods... and here I jam up again in trying to understand your full view. I can't go with the extremely broad "excess money creation" area since you don't seem to buy it, so the best I can do is ask you to please continue the logic train.

I honestly am not trying to set you up, I just plain am not tracking. I may disagree with you and I may not - I can't tell.
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