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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Elroy Jetson who wrote (104324)	8/8/2009 7:28:55 PM
From: 8bits	Read Replies (1) of 110194

Permanent Reserves are not related to the gold colored portion of your chart. They are labeled as securities held outright and have not dramatically increased since last fall like the rest of the chart. They are defined as: Securities held outright: The amount of securities held by Federal Reserve Banks. This quantity is the cumulative result of permanent open market operations: outright purchases or sales of securities, conducted by the Federal Reserve. Section 14 of the Federal Reserve Act defines the securities that the Federal Reserve is authorized to buy and sell. Yet now while the price of these items is collapsing, you're concerned with inflation. You are making an assumption, I can see the arguments for both inflation and deflation. Personally I am mostly holding cash with some precious metals. (About 70/30) I am not wed to any one particular idea.. I am just trying to understand different parties take on the situation. As for prices - gasoline, health care, insurance, and education are all higher for me than they were in 2001. As Russ Winter, the person who started this thread was describing what he saw for the future: Deflation in the things we have and inflation in the things we need. I live in California as you do and certainly there was a dramatic rise (and the collapse) of housing prices, certainly in the central valley and to a lesser degree the immediate SF Bay Area, but that bubble did not affect all parts of the country. As much as we can look at the 30s for parallels for today.. there are several major differences.. the US dollar is not backed by gold and is now a net debtor nation. We are lucky (for the moment..) that our external debt is in US dollars.

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