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: bela_ghoulashi who wrote (76996)	3/28/2008 9:14:50 PM
From: SouthFloridaGuy	Read Replies (1) of 116555

I AM SICK OF "DEFLATION" and "INFLATION". Here are the FACTS: 1) Massive amounts of credit and credit creation capacity have been destroyed in the USA. 2) Most industrialized global Central Banks are destroying the "value" money. I would rate the exceptions as Australia, New Zealand, Iceland, Brazil, some of the main countries which sadly comprise the carry trade (for a reason). The price of money is the interest rate and global real rates are now 1.5%. They ranged at around 3% through 2002 but became totally unrealistic thereafter. 3) As a result of 2), commodities are in an upward trajectory that at this point is never ending until the cost of money goes up - significantly. Gold can go to $10,000, Silver to $500, Oil to $300. They can go up even higher than that. Remember, every day is a bull market for oil in Zimbabwe. Number 3 can be done the easy way or hard way. The easy way is a Fed/BOJ/ECB induced recession like the one Volker brought about (I suspect this will be a lot worse so massive Federal government intervention would be needed to help the afflicted like me). It would have to be a coordinated effort as each zone is contributing to our becoming poorer to "non-core" items. Clean the system and call it a day. The hard way is a deflationary collapse where monetary policy becomes 100% impotent. Japan got a taste of this in the late 1990's when tight monetary policy globally was affecting their internal attempts to debase. Capital markets are free, duh. Money can travel elsewhere - and it did - into hedge funds baby. We're not at a point where the Doctors recognize the symptom. I'm not sure which Econ textbook teaches that destroying the value of money makes people more wealthy. I may have missed that class.

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