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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 (43587)	10/16/2005 2:32:46 AM
From: Perspective	Read Replies (1) \| Respond to of 110194

Mish, I hadn't seen that argument against hyperinflation. You've hit the nail on the head. Hyperinflation happened in Weimar because those who had the power to make it happen also stood to benefit from it. It wouldn't happen here because those who have the power to make it happen would come out on the losing end of hyperinflation. The question is - would the government debt position ever become so serious that they would take back the monetary authority from the Fed and return the printing press to the government? BC

To: mishedlo who wrote (43587)	10/16/2005 3:03:45 PM
From: Claude Cormier	Read Replies (1) \| Respond to of 110194

have explained this many times but not sure if you got to it yet. Yes. Got there this morning. 1) it would bail out debtors at the expense of creditors (banks and other lenders) 2) Carried on long enough it ends the game. ie. Bankers and the FED would put themselves and their wealth out to dry. No doubt about these two affirmations. I agree. That alone should tell you why it will not happen here. That I am not sure. Maybe the Bernankes of this world think they can control everything. They may believe that they can create just enough inflation to bail the systems while keeping it alive for the next cycle. They may use the 1970's as a benchmark. Germany was forced into it by demands from the US and UK and France ...in that the bulk of debt in the US is consumer debt not government debt. Agreed... although current governments debt is very significant. The govt (run by banking interests and other big business) has no intention of letting consumers off the hook as evidenced by the bankruptcy reform act. This make sense... but what if after an initial period of painful deflation, consumers takes the guns (sort of) <g> and demand a bail out. Consumers have a lot more to lose now than they had in the 1930's. Isn't it about time that they take the streets. Yes the FED will fight deflation but ultimately they will lose because the only recourse (hyperinflation) will end the game. I think that they think they are god and will say "We can do it and still remain in control". Finally, unlike the Weimar Republic, it is not just one major country printing away but the US, Japan, the EU, China, and the UK. Chinese banks are likely insolvent with bad loans. Well very good point. Except maybe for China, which is unlikely to go into recession or depression, these other consumers may also take streets and force a bail out. They too have so much to lose like they never had in the past. I can certainly see something like that hapening here in Quebec 5 years down the road. People are fead up with governments. In the scenario where every country is printing, the US dollar can not fall against all of them. They can all fall against gold however. That is the scenario I envisage after the collapse (initially in housing) starts. Eventually all things would rise in price of course. If 1% rates and GSE coining all that money in a housing boom did not remotely come close to producing hyperinflation, what will? Maybe governments buying 10%, 20% or more of existing mortgages in an effort to clean up the mess. They would probably say we can control this but cannot control full fledge deflation. Far fetched...but still possible. After all, they created the GSE's and 125% home equity loans. Hyperinflation can of course be produced at will, but it would destroy those with the power to do it. We agree on that. But do the Bernankes think they have the control over money. Was the "helicopter drop" statement really a bluff? Hyperinflation is not remotely likely. So you admit the possibility of it. All we need if the government willingness to dump money on consumers. That is the only way it can happen. Japan's national debt went from surplus to a deficit of -250% of GDP all while deflation was raging. Creating more debt is not the solution. Moving debts from consumers to governments therefore freeing new consumer buying power, may show up as a temporary solution. If it does, there will be hyperinflation before the new game starts. Is this possible? I do not know.

To: mishedlo who wrote (43587)	10/16/2005 6:15:12 PM
From: jackjc	Respond to of 110194

It does not have to be an all or none destination on either side. We have already seen long bonds selling at approx 50% loss about 25 yrs ago. Can it happen again ?? sure. Bondholders lived thru it. I suggest the gov would print enough to save a majority from BK and allow a big hit to the savers, trying to split the pain somewhere down the middle, in a real emergency. Of course favoring their friends a little, heh heh. If you think it will happen too fast for a judicious division of the pain, emergency announcements of gov help can calm things down IMO. Emergency gov loans have been used for farmers etc, and could be extended to certain classes of debters. And the millions of new gov employees to track all this would help the unemployment prob. The USD has fallen 93% in my lifetime and will continue to fall. But it will not suddenly become worthless, and it will not be replaced by gold. It will continue to sink, with ups and downs as it has, but it is very convenient stuff and can buy anything, and will for a long time yet. Gold was 35/oz when I used to buy an occasional gold coin as a young man. (coins were about 50 then). Gold has held value. But property has generally been a far better buy over the years. I went there. In an emergency cash can be powerful, but do you have the guts to buy with it ?? Most that hold cash through fear will not be able to. And those that buy gold will never sell the spike like Sinclair did last time.