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Politics : Politics for Pros- moderated

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To: LindyBill who wrote (297588)	3/22/2009 8:11:34 AM
From: carranza2	Read Replies (1) of 793955

We get a lot of "doom and gloom" here, but nobody can show how it happens. Why do you think the USD had its biggest loss in decades last week? It means that the USD was dumped. And it took place because the huge highly inflationary purchase of T Bonds by the Fed was announced. Inflation means that all dollars, including the trillions held by our foreign friends, go down in value. The reaction is to dump dollars and recycle them into stronger currencies or into assets which are not being depreciated by the printing press. It is starting to happen as the Chinese are no longer buying T bonds but are instead buying short term Treasury stuff. It won't happen overnight, of course, but we are setting the stage for a highly toxic inflationary scene in which wages lag, fixed income beneficiaries get royally screwed and prices go straight up. It is of course the natural result of increasing the money supply as we have. Focusing on the international trade aspects of inflation, as you do, is to not take into account the whole range of what inflation does. Believe me, it is no panacea. And controlling it, well, remember 21% interest rates? The Volcker years?

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