Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Tommaso who wrote (27867)	3/4/2005 11:36:18 PM
From: regli	Respond to of 110194

"If you mean that the government feared excessive redemptions of paper notes for gold, it is correct. " Exactly! You understood perfectly well, not such a "nonsensical statement" after all. lexisnexis.com wealth4freedom.com "The idea that now, with no gold standard, the price of gold could actually fall as part of a deflationary contraction, betrays a total failure to grasp economic fundamentals. All world currencies are now fiat currencies--paper currencies or even electronic currencies. All currencies are detached from any material substance. Except for the anomaly of Japan, with its pathological addiction to excess saving, deflation is no longer possible." Well, Robert Prechter, whatever you may say about him, has articulated this exact scenario quite well. I actually don't agree with him but he does make a very interesting case. I also remember Heinz saying that such a scenario is possible, not likely but possible. Both Heinz and Prechter seem to have a decent grasp of economic fundamentals. In addition, note that this thread started because I disagreed with the statement "In deflation even gold gets creamed.".

To: Tommaso who wrote (27867)	3/5/2005 6:31:13 AM
From: unrealistic_thoughts	Read Replies (1) \| Respond to of 110194

>> Except for the anomaly of Japan, with its pathological addiction to excess saving, deflation is no longer possible. << There is nothing pathological about earning a guaranteed real return of 3+% and getting taxed on only 1/3 of your gross earnings. if you have 1% interest rates and 2% deflation rate that is exactly what is happening in Japan right now. under those circumstances i'll buy all the bonds for sale with every spare penny i've got. when the government (actually federal reserve) screws up the economy in this way it also tends to drain investment and real returns from the stock market because bond returns are so darned attractive. when and if the USA goes into a deflationary spiral, people who are debt free will be offered these wonderful investment opportunities. people who are debt laden will pay the devil (e.g. Greenspan) with their soul. deflation : coming to a federal reserve branch near you in 2006 : it's not just for the japanese any more !!!

To: Tommaso who wrote (27867)	3/5/2005 9:39:15 AM
From: Tommaso	Respond to of 110194

Footnote to previous message: The reason that Congress authorized (even required) Roosevelt to raise the price of gold in 1933 was the belief that to do so would cause all prices and wages to rise because the dollar had been devalued. Taking gold money away from private citizens was part of this deliberately inflationary policy. The policy did not work very well because of what came to be called by Keynes, the "liquidity trap." You cannot force people to borrow money, if they have learned that borrowing money will ruin them, and you cannot force people to spend if they are determined to hoard cash. Something similar occurred in Japan after its stock market and real estate bubbles popped. For an exhaustive discussion, see: web.mit.edu

To: Tommaso who wrote (27867)	3/5/2005 10:09:26 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Except for the anomaly of Japan, with its pathological addiction to excess saving, deflation is no longer possible. I just do not know how you can say that. Europe is probably very close right now. Please tell me exactly why it is "impossible" for a credit crunch to happen in the US. I have outlined many things that could start one. I am not going to repeat myself but to suggest that it is "impossible" seems rather silly. I say it is not only possible but nearly guaranteed. What the trigger is I do not know. Mish