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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (34509)	7/29/2005 1:31:09 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Mish Here is my take. Hyperinflationists refuse to respond to the implications of a housing bust in conjunction with overcapacity and a blowoff top in credit speculation for one reason only. They can't (at least not in any logically believable scenario). Timba This conclusion, however, strikes me as a bit disingenuous. Mish Can you point to an example in a major economy where we had a big nation-wide housing bust and it was not accompanied by deflation? Timba However, I do believe that the hyperinflationists have made more of a case than your referenced quote gives them credit for. Mish Then let's see a plausible scenario starting with a housing bust that addresses all the issues and concerns that I laid out. If Puplava could do it, he would have IMO. As for a US$ crash, I consider it unlikely (near term) although quite possible. Should that happen we might se a very quick spike in rates, plunging the stock market and housing crash. But would that make hyperinflations right if we get a quick spike like that? Not in my mind. In fact, it might not raise any prices at all, or no prices but oil. That would be hugely recessionary if not out and out deflationary. As for a slow decline in the US$ we must once again ask what? The British pound? The YEN? The RMB (with banks that are insolvent now, and dependent on selling goods to US consumers?) What then? Even Faber does not see a huge collapse in the US$ If my understanding is correct. For the record I see the US$ falling once Greenspan stops hiking. But I do not see an uncontrolled plunge, but even IF that did happen, there is no guarantee that we would see huge spikes in prices. We would however see huge spikes in unemployment adding to deflationary pressures. Thus I find it very easy to poke holes in every hyperinflation theory I see, and no one has answered my questions in a manner that I could not easily respond to. Mish