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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 (38121)	8/8/2005 6:20:30 PM
From: Peter_M	Read Replies (2) \| Respond to of 110194

Of course interested :-) I read your piece before, and I listen to Puplava, and as Dutch person I am aware of the Weimar republic hyperinflation situation and I look at history for clues, ... and always I try to keep an open mind for every argument. I liked your writings as it gives an INTEGRATED scenario for the future. Unfortunately a lot of posts react on parts of the big ..flation question, without framing their scenarios in a logical sequence. May be they have a well thought out full scenario, but due to time constraint did not yet put it in a complete form, or I did not yet read them. I hope they will be proven correct and that I am wrong because I don't like my own conclusion nor its consequences. Anyway, I think too many people take the past actions of the FED as guide for the future. I see economics maybe too simplistic as a wealth transfer mechanism. I think the FED (a select group of big banks) in the end will do what benefits the FED (or the owners of the FED) most. I fear that most people forget what the FED is (if I am correctly informed). I see the FED as a multi national, founded and influenced by a group of very wealthy owners, which are heavily integrated with world power brokers, but still a multi national. As long as interests coincide they and the FED will do what the politicians want .... inflate. But at a certain point, when they do not see any reasons anymore to assist the politicians they will choose their own path. Some questions: What would management of a big multinational do when the customers have 0 savings, are already fully indebted to them, and no more money can be extracted from these customers? Would they lend more money to the customer? Or will they milk the indebted customer until they cannot be milked and then go after their assets? Would the FED be afraid to bankrupt part of their industry? I don't think so. I expect that management would see the 'synergy opportunities' that would arise from such an event. I think most multi nationals would relish the chance to take out the competition. First put your own money in a safe place, e.g. other currencies or gold and reduce exposure as reasonably possible. Leave the dangerous mortgage parts to the competition. Then create deflation which causes more problems for the competition (non FED banks,mortgage industry, etc.) than for yourself. Wait until they are broke and take over the assets you want for two times nothing. Consolidate to a more efficient bigger banking system which includes the former mortgage industry, after sacking half of your and their employees. Also think of the opportunities of a world wide financial crash caused by a demand shock from the US consumer. China will get into problems. Petrol will become cheaper. May be you can even take over banks or build new FED’s in other countries. If I am correct the FED banks are comprised of entities that existed in London the time that the UK was a world power. And as icing on the cake, the already really wealthy (yourself and your friends) who have their cash in different places and currencies than the average person, can also privately make a killing as houses and other assets will become very cheap. So that brings me to the following basic question: Do you think that the (owners of the) FED are able to save or increase their buying power in the event of deflation? And of course the same question for inflation. For me the big question is: Can I imagine any scenario where the FED would expect a larger wealth transfer then the deflation case. And by the way, I think the general public won’t even complain as in my scenario an external enemy will be created to refocus public attention and mold the mind for better crowd control (including financial dealings). Any good politician knows that you need an external enemy when you are faced with internal problems. The ‘enemy’ will be blamed, not the FED and not the reckless financial dealings of the politicians. Just study the end of empires in history.

To: mishedlo who wrote (38121)	8/8/2005 11:27:22 PM
From: GST	Read Replies (1) \| Respond to of 110194

<Stagflation is a wimpy term that Gnazzo did not address but is generally used to describe rising interest rates and a stagnant economy> No, it refers to an economy that has stagnant or declining aggregate demand combined with declining currency purchasing power. You assume that a drop in aggregate demand will result in a drop in prices. In the US we face a potential decline in demand combined with an increase in prices. You simply deny that it is possible for prices to go up if demand is going down. Not so. The source of the increase in prices has been pointed out repeatedly -- it is the declining purchasing power of the dollar. You truly do not appear to grasp the idea that there is a market for the dollar and that a decline in demand for the dollar can increase our interest rates, stall our economy and raise our import prices, all at the same time. The market for the dollar is likely to go into a tailspin in a housing bubble deflation, and the number of dollars it will take to buy anything from a person outside the US is likely to go up. Rising interest rates are also increasingly a function of currency risks and less a function of the market for goods, as you assert. The currency markets are dominated by the debts we have already racked up that need ongoing refinancing even if we buy nothing more from now on. You speak as if the US was a relatively closed economy going through a pretty standard asset inflation-deflation cycle. This is somewhat naive in my view. Stagflation is the most likely scenario in my view. The fact that we will have fewer dollars to spend does not mean prices will go down -- it means living standards will go down. It means we will be poor, with deflated assets, and debased currency and a ton of debt to work our way out from under. We are the world's trailer trash.