The Epic American Credit and Bond Bubble Laboratory Message Board

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

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To: John Vosilla who wrote (82234)	5/30/2007 4:36:52 PM
From: Mike Johnston	Read Replies (1) of 110194

John , what i see here are several dynamics. First, very high inflation and printing presses running full steam. Second , negative interest rates, which fuel even more monetary inflation. Third, we have government intervention in the bond market and Greenspan/Bernanke put. We see a full blown M&A mania, however this could be an early sign of flight from money. Those guys have been handed a no lose proposition. Borrow money at 5% in time of 15% monetary inflation. Buy a business with steady cash flow. If high levels of inflation continue, the value of the debt used to fund the purchase is halved in just a few years of 15 %inflation. In the meantime cash flow and the value of the business goes up. As a bonus you get hyperinflation insurance. If things go bust and you get a depression, you basically strip the company of cash and assets and then declare bankruptcy and default on the debt, all that while still collecting fat salary, multimillion dollar bonuses and dividends. Sound like a no lose proposition in times of money rapidly losing its value and every man for himself trying to stay ahead as broad population sinks into poverty.

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