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

To: mishedlo who wrote (26317)	2/11/2005 6:32:54 PM
From: russwinter	Read Replies (2) \| Respond to of 110194

It's been awhile since I read the book, but I don't recall it especially being a tome about deflation (or inflation). It's more an explanation of how Bretton Woods II works. I think the Roubini essay is more current and accurate for today's conditions (Duncan wrote in 2001 or 2002). <When new consumer credit is cut off, the game is over. > I think you (and maybe Duncan??)automatically equate credit Bust with deflation. Just taking another model for this, Argentina, rather than Japan in 1990, the outcome was inflationary despite a horrific Bust, because authorities elected to print their way out of it. Japan was actually cautious about running the printing presses in the initial Bust stage and thus averted (so far) a big inflation. I feel that is changing however. If you can assure me that the Wizards (most if not all of them, not just the US) will follow the initial Japan early 1990's response and not revert to Uncle Ernieism, then I might be willing to entertain a deflationary outcome, at least at some future point. I believe a deflationary outcome is preferable to a large scale inflation, because at least people have confidence in their money. If the world loses confidence and panics on the USD, that will be far more serious than any deep (and cleansing) economic downturn. I see the chance for a deflation in 2005 as practically nil. I see the chances of a Bust as high, but I think I'm repeating myself on this. I lean toward the Wizard's engaging in Plan A Uncle Ernie "fiddling" because that's what benefits Bully and the plutocracy, and it's Bully, not Joe Sixpack that is running the show. Bully loves inflation and easy money, because it makes defacto stealing and looting such a green light exercise. Inflation financed with easy money is a good formula for lots of criminal conduct and games of euchre. Plan B, the Japan restraint approach, mostly benefits foreigner creditors, and the US Wizards branch cares little about them as long as they make vendor financing available cheap (aggressively and without question buy our issues without regard to price, return rate or the ultimate value of the USD). Of course if foreign vendor financing is withheld (which seems to be happening lately), then Uncle Ernie gets put away for awhile, and the Wizards act reformed and just a bit "responsible". We are seeing that of late. Could that cause an "accidental" Bust? Absolutely, but would that be deflationary? Depends on if the response leans towards the Japanese early 90's model, or Argentina late 90's.