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

To: russwinter who wrote (3669)	12/19/2003 11:23:04 PM
From: philv	Read Replies (1) \| Respond to of 110194

" ``The government needs to send a clear signal it can keep selling yen, no matter how much is needed,''" Japan is seeking 40 trillion yen (372 Billion dollars) to weaken their currency (buy US paper). quote.bloomberg.com The Japanese are the world's greatest savers, while their government spends and spends. But why not. They too have a money printing machine. So, why not simply print yen and buy the printed dollar? There can be no end to this game. As a matter of fact, they could perhaps compete with each other. Whoever can print the first 1000 trillion wins. This arrangement is great. Print lots of yen, thereby debasing your own currency, and buy US paper, further debasing your currency while propping up the US dollar. Can it really be that simple? I wonder what Bernanke would say.

To: russwinter who wrote (3669)	12/20/2003 2:04:55 AM
From: ild	Read Replies (2) \| Respond to of 110194

Date: Fri Dec 19 2003 17:33 trotsky (goldfish@inflation) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved electronic toys? the Italian firm e-tek just dropped prices on most of its goodies by 80%...some inflation. but leaving this piece of anecdotal evidence aside, with China's entrance on the global manufacturing stage, industrial overcapacities in all things electronic have become even more pronounced. no wonder the huge deflationary gap in the US economy continues to persist, with well over 30% of resources being idled. t-bill rates are lately meandering between 0.8 and 0.9%, and the treasury/TIPS rate has begun to contract again, all of which indicates that inflation will continue to fall sharply ( as it has in fact done all year long. even if one rejects the governments statistics, they DO reveal trends ) . as for MONETARY deflation, it has only JUST BEGUN. the only way to measure monetary inflation is by looking at the growth of the money supply. the money supply has now begun to contract, for the first time in 13 years, and the rate of contraction is the largest since 1945. the widely accepted conventional wisdom theory that rising commodity prices in USD terms ( note that gold has e.g. not budged vs. the euro this year, and has declined in several other currency terms, and the same goes for crude oil ) are indicative of future inflation is mistaken. this is only true during Kondratiev summer periods, when debt levels are still low enough to allow for a large expansion - and both labor and business possess pricing power, which they currently lack. recent profit warnings by value-adding food manufacturers demonstrate this clearly - they simply can not pass on their rising input costs. this in turn means that rising input costs will simply damage margins, and the ability to service debt across all industries except the raw materials producers. this in turn should magnify the beginning destruction of the debt berg ( i.e. all the money that was previously created out of thin air ) - inherently a deflationary event. since the debt berg is already so large as to defy any reasonable resolution, it is pretty far-fetched to expect it to grow even LARGER. that however would be the sine-qua-non for any inflation expectations to prove correct. my prediction: DEFLATION will make headlines again in '04.

To: russwinter who wrote (3669)	12/20/2003 8:28:20 AM
From: Wyätt Gwyön	Respond to of 110194

Fannie Mae asked a group of lawmakers to pressure the Fed to withhold a study that is expected to say the mortgage giant's benefit to consumers is negligible. online.wsj.com The Fed paper, which is expected to be released as early as Monday, is said to conclude that the housing government-sponsored enterprises don't lower mortgage costs much for consumers, and that their federal subsidies, valued at more than $15 billion a year, are largely unnecessary.

To: russwinter who wrote (3669)	12/20/2003 11:43:43 AM
From: mishedlo	Respond to of 110194

Greenspan's Housing Bubble cepr.net

To: russwinter who wrote (3669)	12/20/2003 1:27:23 PM
From: Real Man	Read Replies (1) \| Respond to of 110194

Yeah, it makes sense. I think in the short run, things are most influenced by derivatives, since this market has outgrown all other markets. That's why past relationships between different markets (such as dollar and interest rates) don't seem to be working. At least, not yet. In particular, stocks and bonds so far failed to move down as the dollar declined some 30% from the peak. My take on this is that the main derivative market in interest rates is highly manipulated, and so far is holding, as banks pile up more and more into long-term bonds, borrowing short term. They short the dollar to hedge their bets. Some of this liquidity spills over to the stock market. We'll see how it goes, but my bet is when bonds finally break, the normal relationships will be restored in a violent manner. That would mean much higher long-term interest rates, and much lower stock prices.