Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Chispas who wrote (76416)	3/18/2008 7:36:08 AM
From: Dan3	Read Replies (1) of 116555

Mish - One thing to keep in mind through all this... A government determined to debase its currency, can do so, regardless of any other circumstance. The deflation scenario includes the assumption that those controlling the FED, etc. are familiar with Weimar years and wouldn't actively seek to repeat anything that that approaches that situation. That may be a false assumption. I think Bernanke has decided to handle falsely doubled housing prices with a 50% inflation in prices and money supply - and then hopes (and expects) to be able to halt the inflation as quickly as it was begun. Note also that even collapsing production (which we seem to be threatened with) doesn't mean deflation. In fact, it can be the opposite, with fewer goods available to be chased by the dollars printed by the FED and exchanged for RMBS at face value. The FED can directly control short term rates, but not long term rates. Look at the yield curve to see where we're heading in terms of inflation/deflation. The yield curve is either pointing to a reversal from recession to expansion, or to an increase in inflation - and I'm guessing we're not headed for 5% real growth later this year.... :-)

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