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: Claude Cormier who wrote (49061)	1/8/2006 9:53:17 AM
From: Tommaso	Read Replies (6) \| Respond to of 110194

>>>Maybe you are underestimating the numbers of dollars that would come back home if a global flight from the US dollar takes place. Add those dollars to any stimulus the Fed would provide, and this could exceed the purchasing power lost by americans once the RE bubs burst.<<< Money is one of the hardest things to think clearly about that I know. I mean of things in commonplace experience, not advanced mathematical topics or French post-symbolist poetry. I am not sure that a "global flight from the dollar" would bring dollars back to the United States. A decrease in holdings U. S. treasury bonds, or attempted decrease, would drive up interest rates and cause the bonds to depreciate, and that loss of value would simply vanish for the time being, not exactly going to "money heaven" as loss of stock values does, since the bonds are guaranteed to be paid off in currency, or at least in money. A "global flight from the dollar" would devalue all U. S. currency and all bank balances anywhere denominated in U. S. dollars. Since most international commodity prices are set in dollars, this would mean very large price increases as measured in dollars. The average standard of living within the United States would drop rapidly as various luxuries and even necessities became unaffordable. Since collective bargaining is very weak now in the United States now, wages would not rise very fast. Those who were smart enough, lucky enough, or industrious enough to rise above a certain income level might be able to profit from this new order of things and take advantage of it, as I think has tended to happen in South American countries. I have deliberately avoided using any word containing the syllables "flation" in this discussion and instead tried to describe things that I think might happen. I think that stratification of U. S. society in terms of wealth and privilege is among the things that the Bush administration has aimed at, and the consequence of the monetary policies pursued by the Federal Reserve.

To: Claude Cormier who wrote (49061)	1/8/2006 2:24:04 PM
From: kris b	Read Replies (1) \| Respond to of 110194

Maybe you are underestimating the numbers of dollars that would come back home if a global flight from the US dollar takes place. There will not be very many US dollars coming back home when RE bubble bursts. A lot of foreign money is parked in MBS, ABS and other vehicles backed by US RE. Most of this paper is going to collapse in value (it will vaporise) by XYZ %, so suddenly the amount of dollars available for withdrawal is going to shrink considerably. As a matter of fact the dollar will become dearer. Kris