The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: TH who wrote (17161)	2/2/2009 12:42:19 PM
From: Tommaso	1 Recommendation Read Replies (1) of 71407

>>>These people know how to do exactly one thing, and that is inflate. <<< What does seem to be happening for the time being is a drop in "velocity" which is synonymous with a reluctance to spend, debt reduction, and shrinking loan balances at banks. There is also the effect of changing the rules so that the Fed pays banks interest on their deposits with the Fed. Their thinking about the TARP money is probably, "Why risk it when we get risk-free income from the Fed?" But the potential for inflation is firmly in place. Even with the current suposed "deflation," M2 money supply is expanding at an annual rate of 24%. If at some point the Fed does decide to start controlling the money supply, they will have to do so by selling assets. Their assets used to be nothing but treasuries, but their supply of those is way down. If they try to sell those things they have bought recently, it won't be easy. And selling anything by the Fed is identical with raising interest rates. They have been buying like crazy for the past six months, sending interest rates down. Only a small minority of people understand that inflation is currently the deliberate intention of the Fed.

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