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

To: piggington who wrote (31165)	4/25/2005 3:33:03 PM
From: dpl	Respond to of 110194

"Totally agree on that part - but doesn't the prevention of defaults (and btw the rampant printing) prevent deflation from taking hold? " That's the point.By the time this happens(which will be a lot later that 2006) deflation will already have "taken hold." Once the credit bubble starts to contract it is like a chain reaction. It is the deflation that will make the econ fall and once that happens the econ falling apart will cause more deflation.By the time we have deflation(credit contraction) it will be too late.The government and most others will not "see" the deflation until much later than that.That is why it is called a "bubble".It bursts all at once.And all it takes is a slowing of credit creation to start. FWIW this is what I see. If the FED keeps raising rates then this will start later this year or next.If they stop or drop rates for any reason then 2005 is like 1998.It will super charge the RE bubble and extend it several years. When it does pop we will have a very bad and deflationary downturn.The worst post WWII.The price of most things will drop. After this then we will have problems with stagflation.We will need ten's of Trill of dollars and the government will try to print.We will have CPI inflation but still asset deflation.Stock and Re will still be in a secular bear helped by higher interest rates and the boomers retiring.