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

To: RealMuLan who wrote (16918)	11/27/2004 2:23:44 AM
From: John Vosilla	Respond to of 116555

Sure sounds like the best outcome would be a long drawn out period of slow growth coupled with a very serious recession to wipe off the books much of the excess debt secured by various assets that the coming stagflation can't pump up high enough. More than likely many midwestern areas should benefit that have lagged the past cycle with low cost housing, manufacturing, agriculture and natural resources leveling the playing field in a weak dollar environment. Whether a strong midwest recovery will be enough to offset the ramifications of the coming housing crash along the coastal markets and keep us out of a serious recession is doubtful. <Here is how a coordinated decline in the US dollar is supposed to rebalance an unbalanced world: 1) A global agreement to let the dollar fall (explicit or implicit) leads to: (i) Gradual increase in US interest rates (ii) Dampening of US consumer demand (iii) Increased domestic savings, reducing the dependence on foreign funds (iv) Making US bonds more attractive for new buyers to help maintain capital flows to US. 2) A weaker dollar pressures European and Asian exports by: (i) Forcing them to focus on domestic demand compensating for lower exports and decline in US consumer demand (ii) Increasing US exports and reduces global trade tensions 3) Ultimately leading to improvement in the US current account and more productive use of surpluses in Europe and Asia. >