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

To: mishedlo who wrote (18227)	12/9/2004 5:01:59 PM
From: RealMuLan	Read Replies (4) \| Respond to of 116555

What are they smoking? <g>

To: mishedlo who wrote (18227)	12/9/2004 6:46:30 PM
From: Crimson Ghost	Respond to of 116555

Deflation As a Far-Off Outcome Bill Fleckenstein Now I'm sure that as soon as the stock market kicks into gear to the downside with all the bad news it's been ignoring, the deflation rhetoric will really heat up once again. As I have been saying for a long time, I don't think that deflation is a likely consequence anytime soon. Once we have attempted to print our way to prosperity and the currency collapses -- a process that's under way, I might add -- we may eventually get to the point where the Fed is unable to ease, and our equity and housing market bubbles pop. After that, maybe then we will experience deflation. That is entirely possible. But we're not there yet, and to make bets about that outcome by owning fixed income seems quite dangerous to me, given that if we're to see the scenario I've just outlined (the dollar being shredded), fixed income will face some pretty serious headwinds. Remember, when these bubbles start to pop, the response from the Fed will be to print money. That also tends not to be deflationary, as we've seen for the longest time. As I say, at some point I expect foreigners to take away the punchbowl and stop us from easing. But the present group of Fed heads and our administration will continue to opt for stimulus over currency stability. In summary, I would say that someday we just might see deflation in this country, but a lot of things will have to happen first, and not much money is going to be made betting on deflation in the interim. Memo to Bernanke: Gas Up the Chopper That's not to say you have to make a bet on inflation. I'm not saying that either. But it's one of my pet peeves to see the word "deflation" bandied about when we've not experienced it in 70 years, and when we've got Fed head Bennie Bernanke threatening to drop dollar bills out of helicopters. We won't see deflation until after the helicopter's been blown out of the sky.