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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Mike Johnston who wrote (82277)5/31/2007 12:36:08 PM
From: Real Man  Read Replies (4) of 110194
 
It could go two ways,

The first way is a dollar crisis that ends at some point
after a significant decline
because the trade deficit will reverse. The Fed will have
to allow credit market bubble burst and lots of defaults
and pain.

The second way is hyperinflation, all the bad debt will
need to be monetarized. Ultimately, the pain
of hyperinflation is much worse, but short term the
the jobless rate may even go to zero. The real pay for some
real jobs will drop to Chinese levels or worse then.
The pay for financial jobs will skyrocket. Speculation
in goods and stocks will totally replace the real economy, a
vicious cycle
that could last a while until someone steps in to
stabilize the currency. WS will prosper fabulously.
The real economy will disintegrate,
the country will not be able to even produce food. Hunger,
riots, a communist revolution or a fascist dictatorship
are all consequences of hyperinflation which are quite likely,
unfortunately.

I suspect the second way will be chosen, based on who is
running the show. That is, until things change, and
hyperinflation takes hold and is very visible. I wonder
how they will be able to massage inflation data if
it will run at 50% per month? Unfortunately, the second way
always results in a complete disintegration of the real
economy, and the society as a whole.
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