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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (3188)	3/30/2004 11:20:23 PM
From: gregor_us	Read Replies (2) \| Respond to of 116555

Too Early: I Remain With My View That Deflation is the operative paradigm--and inflation panics occur/will occur, inside of that. Deflation remains the Big Enchilada. This is the structure, the idea I've advanced since coming onto this board. I've just never really known what would be the trigger to cause the Debt Mountain to comes crashing down. Could still be a panic about a slowing economy that does it. And yet, I am now wondering if its an inflation up-spike that does it. PS: My cycling catalogues have some through the mail for Spring--they all apologize for higher component prices--caused by the "weakness in the dollar." Campy (Campagnolo) parts just got more dear! LP

To: NOW who wrote (3188)	3/31/2004 4:32:13 AM
From: Raymond Duray	Read Replies (1) \| Respond to of 116555

Re: i just wonder if history has examples of the emperor's clothes being ripped off of the inflation BS we are now getting and people saying" oh my fu#$ing god, we are being eaten alive!!" A recent example where the public was well aware of the crisis before the party really ended was Argentina. Ironically, what they didn't realize was that a lot of their misery was caused not by foreign banking corporations, but rather by flight capital of their own oligarchs. Here's an interesting and (to me) novel insight into the devastation in Argentina in the 1990s: globalresearch.ca <SNIP> SS: Can you give an example of how this worked? MH: In 1989 I was hired by the Boston money-management firm of Scudder, Stevens and Clark to spend a few months of my life organizing a sovereign-debt fund, that is, a fund investing in the bonds of third world governments. This was the world's first such fund, and it started what would become a torrent of issues in the 1990s. But at that early stage Scudder was unable to find American clients willing to put $75 million into a region where they had been burned badly in the aftermath of Mexico's 1982 insolvency. On the other hand, that traumatic event had pushed borrowing rates up to nearly 45 percent annually for Argentine and Brazilian dollar-denominated government bonds, and about 25 percent for Mexico's dollar-denominated medium-term tesobonos. These rates enabled the fund to be more successful in finding foreign buyers. Incorporated in the Netherlands Antilles (Dutch West Indies) as the Sovereign High -Yield Investment Co. N.V., its shares were listed on the London Stock Exchange. The underwriter, Merrill Lynch, sold them mostly to well-connected Argentine families through its Buenos Aires office, with the balance taken mainly by Brazilian and other Latin American buyers. Their money was invested in the high-yielding bonds of their own governments. The irony was that the exorbitant interest payments being made in 1990 were largely due to Argentine flight capital and to Brazilian families operating offshore as a "Yankee fund." The fact that it was set up offshore meant that no U.S. investors were allowed to buy its shares. The biggest investors were political insiders who had bought into the fund knowing that their central banks would pay their dollar debts despite the high risk premiums. While these local oligarchs appeared in the statistics as exploitative "dollar creditors" to their countries, domestic demagogues blamed the Yankees, the IMF, the World Bank and British bankers for enforcing financial austerity on their countries. Yet the dollar debt of Argentina in the early 1990s was owed mainly to Argentineans operating out of offshore banking centers. The major beneficiaries of foreign-debt service were their own flight-capitalists, not bondholders in North America and Europe. To Argentina, a "foreigner" was likely to be a local oligarch operating out of an offshore account invisible to their government (which consisted largely of their own families). <END SNIP> So, if past is prologue, what we will discover in America in another 5 to 10 years is that the beneficiaries of the inflation that is being imposed on the U.S. today will end up being friends of George Bush who are creating the phenomenon in the first place. That's so obvious, I'll give odds. :)