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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 (29401)	3/25/2005 7:52:20 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

The Argentine experience demonstrated that it is quite possible to experience hyperinflation and depression at the same time time if the currency collapses

To: mishedlo who wrote (29401)	3/26/2005 8:05:38 PM
From: Kaena™	Read Replies (3) \| Respond to of 110194

Prior to the Y2K "non-event" event, I expressed my views in a series of posts (on SI and over at Stockhouse) that America was headed for "stagflation" as we progressed into the 1st decade of the new millennium. At that time after 18 or so years of deflation, the Asian debacle, LTCM debacle, various other non-asian currency debacles, etc., most feared recession/depression. Proponents argued that the dollar would be king in such a scenario. I pointed out among other things that the dollar was strong during the 30s depression (after being devalued 43% by Roosevelt) for the obvious reasons that it was pegged to gold at $35/oz - in addition gold was confiscated (Americans were forbidden to dump dollars to own it ). Obviously, we have a very different set of circumstances for the dollar and gold today – absolutely no remnant of a gold standard discipline for the dollar. Instead, since the late 90s we've seen the trade deficits, federal and state deficits/debt, and consumer debt swell, the exodus of the manufacturing base and resulting loss of wealth producing jobs – and most importantly the Feds' reaction over the past couple years – Fed Reserve Governor Bernanke's "helicopter money" response, among other things. No, to the contrary, money is not "destroyed in mass," it does not go to money heaven - because its already been created in mind boggleing amounts over many years – it comes out of the woodwork to become worth – less. As interest rates rise, credit expansion induced housing/consumer bubbles collapse, fed, state, county and corporate bond debt, GSE mortgage backed secuities debt, and all other leveraged malinvested dollar speculations collapse, Japan-Asia/Europe/Middle East would need their money back at home converting vast dollar holdings back into domestic currencies/commodities/resources. I argued that as the "viscious-cycle" dollar slipped in value and dollar based commodities responded by rising in price, surplus nations such as Japan would eventually have less "surplus" money to manipulate/buy US dollar/treasuries. (Just as is happening today with oil, gas, coal, copper, steel, etc.) Shrinking inventories support high prices even as economies slow - China/India/Indonesia a good example of supplying goods to growing populations with limited commodity inventories. As currencies continue to devalue, even more pressure is placed on commodities as a store of value regardless of slowing economies. Think of all the commodities consumed during the depression at the onset of World War II. Commodities are increasingly considered as national security interests to world governments especially after a 20 year depletion of inventory and especially in today's precarious saber rattling war environment. I too believe the end game is here playing out and will happen sursprisingly much more quickly than it took to arrive. I've been buying gold since about 1999 and continue to accumulate on set backs. Debts must be repayed or chaos will reign and repayed they will be - in devalued fiat, thus "Stagflation", "Depressionflation," or some such phenomenon. And jobs must be created even if subsidized by "helicopter money" to pay those debts. Hence, MONEY (worth-less) is CREATED in mass until the system is scrapped for some form of gold backed currency. Because little discipilne exists for the fiat currencies/fiscal retraint – after "stagflation," then hyperinflation, then depression, then more widespread war, then a gold backed currency. This whole process would need atleast a decade or more to unfold. I don't discuss it much anymore - it's been unfolding pretty much like expected. I have noticed a lot od die-hard deflationists now beating the inflation drum (well after the fact).