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

To: kris b who wrote (49943)	1/17/2006 9:46:58 AM
From: GST	Read Replies (1) \| Respond to of 110194

I don't disagree with what you say, except for one thing: The outcome in Japan, where the Japanese government spent a fortune trying to pump up the economy, would have been inflationary had it not been for the current account surplus and savings rate of the Japanese. Combine your points with these two points and you get the whole picture. Now in our case, assuming our economy stalls as many here seem prepared to accept, you have the recipe for inflation rather than deflation. The economy stalls, the government spends MORE money (not less) to try to keep the economy growing, the dollar declines and our trading partners charge a risk premium in lending to us to cover the currency risk which impacts interest (more restrictive credit terms). The fall in the dollar is not likely to be something we can stop or even seem motivated to stop (we are afterall begging for devaluation in relation to China). A falling currency in an economy with a massive current account deficit and a low savings rate is inflationary -- not deflationary.