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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 (3881)	12/25/2003 3:56:32 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 110194

Given the dollar's performance this year, the BOJ almost certainly already has taken substantial losses on its dollar holdings. This is not just a matter of possible future losses IMHO.

To: russwinter who wrote (3881)	12/25/2003 10:52:35 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

One important aspect I do feel, is that the BOJ will wreck Japan for a generation if they persist, and that buying and holding unprecedented amounts of Old Maid cards (overpriced US debt securities) is not going to be a free ride. The previous post 3880 sort of says it all. I agree. They are idiots and really get NOTHING (on any lasting basis) out of supporting the US$. You can not change the macro trend, at best you can slow it down. Mish

To: russwinter who wrote (3881)	12/26/2003 12:24:10 AM
From: Joan Osland Graffius	Read Replies (4) \| Respond to of 110194

russ, There has been serious discussions on SI concerning inflation, deflation and stagflation. If one defines inflation as monetary (fiat) growth fueling misallocation of these funds into non productive assets, I believe there is a law of economics that the system must experience deflation of the money supply. During the 1990's the system experienced monetary growth with a serious portion of this capital invested in non productive assets. My thinking is the money supply that went into these non productive assets must be destroyed. My theses is the US must experience a period of deflation. If this deflation is managed poorly, while the capital is under destruction, after the destruction of capital the system could experience massive inflation. In other words if the central banker floods the system with fiat currency a John Law type of environment could then be experienced. What is interesting to me is Japan has not as yet experienced inflation, which tells me they have not destroyed the capital that was misallocated during their bubble. I guess we know this is true as the banks in Japan are still holding non productive loans. The system can experience higher prices for goods and services, but this is not inflation. It is the cause of the fiat currency devaluation relative to other competing currencies. If these higher prices are associated with goods and services required for survival this will cause deflation to increase more than the misallocation of capital because less capital will be available for procurement of non essential goods and services. These higher prices will also cause people to wait to purchase essentials until required. What I am thinking is, people will wait to purchase goods until it is absolutely necessary.