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

To: dpl who wrote (35554)	8/18/2005 3:27:34 PM
From: mishedlo	Respond to of 116555

A US$ panic would be a deflationary event anyway not an inflationary one.Rates would shoot up and RE would plunge.Rates would then plunge themselves. I agree with that actually and have said so before myself. It would however cause a short term spike in treasury yields that that would likely be the death of all kinds of economic activity. The longer such a spike lasted, the worse the affect. I disagree that a slow drain is necessarily inflationary. As I said earlier, it depends on other factors. The US$ did a moderate drain over a fairly long period recently and the price of goods coming from Japan and China did not rise. That alone should cause someone to question the validity of the idea. Furthermore, I offer as proof that something does NOT HAVE to happen, the deflation in Japan with a falling YEN. Inflation on the sole basis of a falling currency is by no means a "lock". That theory has already been proven false IMO. Not only is it not a "lock" I dispute it will happen. It could, and IN ISOLATION it would. But.... There are just too many other factors. Mish