Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: UncleBigs who wrote (48130)	12/25/2005 9:35:31 PM
From: Kailash	Read Replies (1) \| Respond to of 110194

As the price of housing falls, people will no longer be able to maintain their level of consumption and imports will drop. In the short term, however, I don't see why government spending would fall; its commitments are slow to turn around. Whether or not tax receipts drop, the US will need to borrow money from abroad. The willingness of foreigners to invest in a declining US economy is likely to decline, prompting higher interest rates and/or a lower dollar. At the same time, the drop in spending will call for lower interest rates. The Fed in other words won't have the ammunition to deal with this. Won't it be very tempting for the Fed in this situation to print money and let the value of the dollar drop relative to, say, the yuan, yen, and euro? I take it you're arguing the value of goods else will drop even faster, so that in the US, the dollar will be a reasonable store of value.