We'll see. Stagflation is the direction of the ship, and
deflation thesis could simply be right at this
moment in time, as we see a reversal in credit creation? US current
account deficit accounts for global monetary pump? Etc. You
are a bear, so you know the story well. We should see a
rather drastic drop of S and P 500 then, and US current account
deficit should come down quite a bit too. Gold always has been
and remains a monetary metal. The tag of war is between
the natural deflationary forces at this point of the credit
cycle and the Fed's irresponsibility with the printing press.
Bugs believe the press will always be used irresponsibly -g-
A bunch of stuff on this on minyanville.com. A very simple
thesis here - Fed's account has been drained (loaned out
via repos and the soup of facilities) to about 350 billion,
and it remained roughly stable since May. They printed
20 billion since, but it's not enough, as the credit destruction machine is going at full speed ahead. When they
print hundreds of billions, we'll go Zimbabwe.
The problem I always had with that line of thought is
that US government itself is in huge debt, so dollars must
be created to pay for all of this, and they will. However,
deflation is possible intermediate term. Japan has done it for
decades - the debt levels of the Japanese government are
even more insane now than those of US government. However,
Japan is an exporter. Makes a huge difference...
The credit crisis WILL spread to US government debt next.
It may take some time, as the authorities will do whatever
possible to postpone the inevitable. |
