To: UncleBigs who wrote (49510 ) 1/12/2006 12:47:10 AM From: TimbaBear Read Replies (1) | Respond to ...Fear that the FCB's start to indiscriminately dump dollars and fear that the Fed will use the printing press. Let's think through this and connect all the dots. eventually be indiscriminate FCB selling of USD and bonds but first there is the drying up of demand for buying our debt and then the using of stores of USD to purchase tangibles like oil reserves, gold, etc.When risk aversion takes hold, domestic demand for safe income in the form of U.S. Treasury debt will skyrocket. some small increase in domestic demand, but nowhere near enough to offset FCB buying. You are creating a possible scenario and vesting it with all the strength you can but that's pretty tenuous without facts to back it up. We have a negative savings rate and paying down debt isn't buying Treasuries.All currencies are fiat and ultimately a currency's value is it's purchasing power. If asset values are declining, the purchasing power of the dollar is rising. It in the longer run, America is healthier if we reduce our dependence on foreign capital to fund our deficits. We can manage through an environment of a weakening economy and a credit contraction without a panic dumping of dollars by the FCB's. There is no incentive for the FCB's to ensue in a panic wholesale dumping of US dollar debt can happen. We've gotten ourselves into a classic situation where it is a more ripe thing than we have faced in many decades.How are deflationary tendencies overwhelmed by higher interest rates? Higher interest rates would accelerate the deflation. It may very well be that Asia fares the inevitable credit bust better than the U.S. How does that bolster your hyperinflation argument? your construct dude, but that don't make it real.
