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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 (27882)	3/5/2005 12:43:16 PM
From: Tommaso	Read Replies (1) \| Respond to of 110194

Well, you know what I think. Deflation requires sound money and the United States does not have sound money. We have paper money and irresponsible extension of credit. If house prices revert to what they were three years ago, that will not be general deflation. That will merely be a decline of the housing market. I do not expect to see prices on corn, beef, copper, zinc, coffee, orange juice, oil, natural gas, lead, gold, platinum, silver, lumber, palladium, soybeans, or any other agricultural products going into a decline. I expect to see them rise. I do not expect to see wages and salaries falling. I guess I also do not expect to see wages and salaries rising as much as the cost of commodities and many manufactured goods, and so in a sense the real standard of living will be deflated. I hope that in the event that no substantial old-fashioned deflationary contraction occurs in the next five years, you might retract the word "silly" to describe my point of view.

To: mishedlo who wrote (27882)	3/5/2005 12:56:48 PM
From: Tommaso	Read Replies (1) \| Respond to of 110194

Say, I just went over to your own thread, where you just posted something that contains the following: History provides some harrowing examples of what happens when an economy collapses under the weight of unsustainable debt. One of the most chilling is Argentina in 2001. When the International Monetary Fund cut off its support for the country's escalating debt, the effect was catastrophic: the value of the national currency plunged, decimating the savings of millions. The resulting surge in inflation and sudden slowdown in consumer spending put thousands of businesses into bankruptcy within weeks. That, in turn, put further millions out of work and pushed one of South America's biggest economies into a punishing recession. As unfathomable as it may seem, most economists think something like that could happen in the United States. "If foreign investors look at the long-run outlook for the federal budget and decide there is going to be a crash, you get a financial panic," Bivens explains. "Interest rates spike. That causes a huge recession. You'll have the dollar falling fast, so maybe inflation is sparked at the same time." And if interest rates spike, that would squeeze millions of U.S. consumers who have taken out loans against the rising value of their homes in recent years. A sudden hit to the real estate market would further constrain consumers' wallets, leading to a cycle of lower spending, and deeper recession, Bivens says. Apparently you think "recession" is synonymous with "deflation." It's not. The first word describes business conditions and the second describes a monetary phenomenon. You can have both recession and inflation at the same time. Can this happen? It not only can--it did, in the United States, 1973-74, and it took eight years to recover from that stagflation. You are looking for something to happen that was common in the period 1870-1933 and which has not happened since the United States began to go off the gold standard.