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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (235)	7/19/2003 8:14:55 PM
From: Silver Super Bull	Respond to of 110194

Darfot, Good post...I would agree when you say "it is impossible for "all countries" to devalue their currencies" - at least relative to each other. However, that doesn't mean that most if not all won't try. That is why the idea of "competitive currency devaluations" is potentially so nasty. The less aggressive will be the "losers." One of my questions is whether the "competitive currency devaluation" game has already begun. And how / if / when the U.S. will play the game. DB

To: Wyätt Gwyön who wrote (235)	7/20/2003 10:20:37 AM
From: Little Joe	Read Replies (1) \| Respond to of 110194

“it is impossible for "all countries" to devalue their currencies, since the currencies are valued against each other” I disagree when currencies are measured in terms of each other this is true, but when measured against hard assets this is not the case. So, if for example over time the US and say GB engaged in competitive devaluation of their currency (which would mean in effect they are inflating their currency) the value of hard assets, including real estate should go up. In fact this is what has happened. . “a number of reasons could be given for why RE prices would be vulnerable, but perhaps most importantly, a devaluation is likely to be accompanied by a serious upswing in interest rates. housing affordability in the US is determined less by principal amount than by monthly payments, so lower principal prices are the likely consequence which would follow from higher interest in monthly payments in excess of real wage growth (if any, which is itself unlikely in a devaluation--in fact a decline in real income could be a secondary contributing factor to a housing decline) when you add into the equation the huge amounts of leverage existing in the economy--and the attendant potential for a vicious spiral of default-induced selling into weakness--the possibility of a serious price bust cannot be dismissed out of hand.” Well in the sixties we had a falling dollar, rising interest rates and rising home prices. So experience proves that it can happen. The point I think you are missing is that the devaluation of a currency is just another way to say inflation and when you have inflation the price of everything, including wages, goes up so people can afford more. This is exactly what happened in the sixties. I bought a home for 28,000 and sold it four years later for over 60,000.00. Was this a housing bubble? The same home I sold for 60,000.00 today would easily sell for 200,000. The point is that if you consider what is happening world wide everyone is trying to inflate their currency and devalue their currency against their trade competitors, without the discipline of a gold standard it seems to me the inevitable result will be much higher inflation, wages, prices, at least until the currencies of each country blow up and the resulting and inevitable deflationary forces prevail. I think we are a long way from that juncture. “thus, imho, some hard assets--such as, ahem, gold--may be the "place to be” On this we agree. Little joe