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

To: CalculatedRisk who wrote (39661)	8/25/2005 12:33:20 AM
From: mishedlo	Read Replies (3) \| Respond to of 110194

Interest rates and currencies are a very complex subject. There are numerous factors. Japan tried for 18 years or whatever to induce inflation and failed. If Bush declares war on the world god knows what happens. How hard do they fight this? Will there be huge trade wars? Will China be branded a manipulator? Will housing crash or just do a slow long slide? What will be the affect of the new bankruptcy bill? Will the borders be sealed off with Mexico and immigrants kicked out? Will there be a credit implosion or a slow leak? What the H will demand for goods be in the rest of the world do when and if the US slows? That latter question is actually crucial. What a about panic? A bird flu epidemic that strikes humans? These are all potential factors. As for me I do not think the rest of the world picks up in terms of demand, I do think there wil be mammoth overcapacity, I think that the US will start printing but so will everyone else, I do not think it will produce any jobs in the US or any wage hikes, I also think a housing slowdown will cost a ton of US jobs, and my model says the net result of all of everything will be deflation and falling interest rates, possibly with intermittant spikes up (enough to occasionally kill any recovery attempts). The key to me is jobs and wages and housing. I see negative, negative, negative. The next important thing is demand outside the US for goods and services. I see negative on that too. Are there lots more factors? Yes and I am sure I only named some of them. As I said it is quite complex but I am concentrating on the 3 or 4 main drivers and discounting a prolonged panic. Mish