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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 (49116)	1/8/2006 6:53:24 PM
From: kris b	Respond to of 110194

More to the point I do not know what "dollars coming back home means" He meant that foreigners want to unload US denominated paper and convert greenbacks into their national currencies. In a nutshell everybody is selling $ US and buying everything else. "Your point seems to mean that velocity would drop and I agree" My point is that with the collapse of the debt market, one can only collect pennies on the $ US. Nothing to convert into other currencies. Quantity of US money/credit in the system drops off dramatically. $ US becomes very sought after asset around the world not just in the States. How will you buy oil and other commodities without it? How will you pay back greenback denominated loans? At this point everybody is scared shitless and doesn't lend any money or asks exorbitant interest rates to compensate for the elevated risk. Check excellent charts by Russ, where BAA in 1932, at the depth of the depression, was yielding 11%. VELOCITY DROPS. Once we are past the point of no return even FED can't do anything. Nobody can force me to borrow money when I am scared to death and unemployed. Ask governor of Bank of Japan. He was pushing on the string for years. Everybody knows what happens in inflation/deflation/depression etc. My 64K question is whether FED/FCB/SPECULATIVE TYPES will be successful in re-flating once the US housing bubble collapses. Which asset class will they push as collateral? WILL IT WORK UMPTIETH TIME AGAIN? If it does, we should all hang our bear skins and start wearing bull horns on the forehead. Kris