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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: RJA_ who wrote (99559)11/9/2008 8:41:36 PM
From: Hawkmoon  Read Replies (2) of 110194
 
Chirchills mistake was to pretend war time inflation did not exist.

Agreed.. The point I was really trying to make was that people trying to encourage us to return to the gold standard should consider the deflation that occurred when England attempted to return to the pre-WWI established gold value.

And trying to tie gold to the current money base would only serve the interests of those playing the gold markets.

The true value of a currency is to find a balance between debt and the ability to repay it. Debt equals the creation of money, and default on that debt equates to the destruction of money.

Permit the vast destruction of money supply and demand for that money will go up and prices will decline via deflation relative that increasing demand for money.

Anyone who looks at the decade long liquidity trap being experienced in Japan can see what happens with excessive savings are not matched by economic investment. It sits in an "electronic mattress" earning no real return, and winds up being borrowed in a "carry trade" by foreigners and creates global economic imbalances. And when that carry trade unravels, it has drastic consequences. All because the unwillingness to take risk has stagnated the domestic economy and the Japanese attempt to manage the appreciation of their currency by wide-scale lending to foreigners.

Hawk
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