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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 (39665)	8/25/2005 9:32:59 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

Mish, I'm not going to weigh in on this debate, because you already know my view (close to what GST is espousing). Instead I want to point out something about the Eurodollar market, because I know you tend to trade it. It will be a land mine in a "credit event", as essentially it's USDs abroad, money controlled by foreigners and foreign interest. Plus alot of crazies borrow or hedge in EDs. The old term for describing the spread between Treasury bills and EDs was the TED spread. advfn.com You hardly hear it anymore, but the ED could blow out significantly against Bills in a panic, or credit revulsion, so look out.

To: mishedlo who wrote (39665)	8/25/2005 12:24:23 PM
From: bond_bubble	Respond to of 110194

Mish, Britain, in the midst of depression had inflation!!!!! futurecasts.com 10% inflation in 1931 with wheat, steel, house, jobs ALL falling!!!! I think US today is like Britain in 1929!!! The history will repeat!!! It WILL be monetary deflation and CPI inflation around 4-5% because of lack of USD support - And I believe FED understands this and hence interest rates will go up - irrespective of JOBS falling, house falling, Chinese selling their stuff at even lowered price (lower in yuan BUT higher in USD!!!). It is exactly same as today. China, Japan holding US bonds etc......Below are the excerpts!!!! Expectations were that the pound would lose a substantial proportion of its purchasing power in foreign markets. With foreign raw materials and goods costing more in terms of pounds, a significant price rise within England would exist for a couple of months side by side with the great unemployment caused by the Great Depression. This is an occurrence that John Maynard Keynes and his followers have always since conveniently ignored. By the end of the year, the British price index would be up almost 10% - it would still be up more than 4% a year after the devaluation. ? If the devaluation had not been accompanied by harsh austerity measures - if it had been "accommodated" by monetary expansion - the inflation of prices could have continued indefinitely, even with Great Depression unemployment. This is the mechanism of inflationary depression - the worst form of economic collapse - and stagflation - its much milder form experienced in the 1970s in the United States. If the pound declined by 1/3, it would cost the U.S. and France about $650 million each. In both France and the U.S., there was about $2 billion in English securities held by governments, financial institutions and private citizens. About 60% of the world's business was done in pounds. Holland, Sweden, Switzerland, which were pound creditor nations, would be hurt. Germany, Austria, Hungary, Italy, which were pound debtor nations, would be helped, by the decline in the pound sterling. But all would be hurt by the loss of purchasing power throughout the British Empire and for all who held assets denominated in pounds.