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: mishedlo who wrote (50282)	1/19/2006 4:54:23 PM
From: GST	Respond to of 110194

<This person totally fails to see how things are inter-related and totally fails to see how anything matters but a perceived bubble in the US$ will force prices to skyrocket. Obviously his theory is fatally flawed except in a total vacuum of "the US dollar is overvalued". As long as one stays "in the vacuum" and ignores the other ramifications of the "dollar bubble" theory the idea that this is inflationary will live on.> Mish I believe this is called "projection". The debt bubble underpins the dollar bubble -- the dollar floats on a sea of international debt. Housing is merely the latest manifestation of the dollar bubble. The stock bubble kept the dollar afloat and the housing bubble took its place. The housing bubble bought us a few more years time. Now it looks set to burst -- or so many believe. The stock and housing bubbles have inflated US assets and made these assets useful as trade for goods and services and foreign Debt. Take away the stock and/or housing asset growth that keeps pumping hot air into the dollar and the dollar falls. A falling dollar is a strongly inflationary driving force -- it is quite simply not not deflationary. On the evolutionary ladder of intellect, anybody whose knuckles no longer touch the ground can follow this logic. Many are puzzled as to why you cannot. The US and Japan (along with China) are at opposite ends of the spectrum as to the financing of their respective currencies. The financing of the yen strongly inclined them to deflation despite vigorous but useless attempts to reflate. China will face similar deflationary pressures if their economy slows, as it well might. But for the US the dynamic runs in exactly the opposite direction. Our economy is strongly (very, very strongly) tilted towards inflation due to our low savings rate and our massive current account deficit. Credit bubbles per se tell you nothing about inflation and deflation unless you factor in the currency impact of the current account -- this is simply basic economic reality, and your views are detached from these elementary aspects of our economic situation.

To: mishedlo who wrote (50282)	1/20/2006 12:46:52 AM
From: Claude Cormier	Read Replies (4) \| Respond to of 110194

Mish - A complete scenario MUST include bankruptcies, wages, jobs, and a housing bust or at least plausible explanations or assumptions as to why they would or would not occur. This is so true. But a complete scenario must also include the possibility that Bernanke brings his helicopter speach into reality hoping that he (they) can control the game and maintain the system. As an example, 2 millions canadians or so received this morning an automatic deposit of $125 in their bank account, simply to compensate them for a recent increase in heating oil. This is a small amount, but nothing could have stop them to send a lot more for whatever just cause. Heinz - well, for one thing, against WHAT is the dollar supposed to collapse?. Certainly not other currencies as most are also fiat. Although some, like the CAD are backed by strong resource-base revenus. But rather stuff of all sorts, including gold. Yes house prices are much higher due to easy financing. But they are also up because higher material costs big time. Infrastructure of all sorts carry much higher capex. Operating a shop or a truck fleet is much more expensive.... etc All due to material costs. In the end, the bubbles are everywhere...in fiat USD, debts and housing, terrorism and international intervention and hegemony. He who can predict exactly the outcome of this mess is a genious.