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

To: John Vosilla who wrote (45324)	11/11/2005 10:12:04 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 110194

Do I expect a repeat of the late 1970s? In a word, yes. History doesn't repeat itself, but it likes to rhyme. We both know that Americans have been spending more than they earn by using their home equity as an ATM machine - but it looks like the ATM is now closed. In addition, oil prices have continued to take an increasing portion of the national income. This collectively leads to something like a 6.5% reduction in GDP, which is a really, really bad recession. Does Bernanke at the Fed try to disguise this rough recession by devaluing our currency? Only Bernanke knows. I think he will, while Calculated Risk believes he won't because he's been assured by someone that Bernanke is not an inflationist. On either path, you get tough times. Only the details will vary. Having worked at Chevron during the last oil price bubble, I ave to say this all looks very familiar. At that time, the Fed tried to replace the purchasing power being lost to the economy by recycling dollars from oil producing nations and rapidly expanding the money supply. Another perspective is -- since the Saudis wanted to purchase only Treasury bonds and Citibank stock, there was a loss of demand in the economy. The expanded "Money Supply" created only inflation, rather than continued prosperity. This is the inherent flaw in Monetarism. Additional credit ultimately does not cure the problems caused by excessive debt. .