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

To: GST who wrote (50556)	1/21/2006 3:25:30 PM
From: benwood	Read Replies (3) \| Respond to of 110194

Sorry, I really can't agree with that. Zimbabwe, for example, is a tiny country. Yet they print money like crazy and are subject to hyperinflation. Our exploding trade deficit is the product of years of bad monetary policy. The stealth tax from inflation, and the erosion of the federal debt though inflation, both provide enormous public support for inflation. Yet, after years of too much inflation, our cost structure dwarfs emerging economies. Globalization simply exposed how out of whack we've become. So our manufacturing base collapses and the deficit explodes. Bubble economics, also engineered by the Federal Reserve, have resulted in massive over-investments or malinvestment in the late 90s, and massive underinvestment in what would really serve us now, like being a world leader in solar, for example, where there now is a worldwide shortage solar panels. Too bad we aren't exporting those, eh? Instead we import from Japan and Korea, when we can get them. Adds to the trade deficit. The oil we consume because of the higher resulting current cost of solar means we import more oil, meaning more trade deficit. Long term, it's simply a game of chicken. Inflate enough that workers feel like they are getting ahead with raises, because they are too ignorant to realize that a) they are behind the inflation curve (falsified or not) and b) their retirement nest egg is deflating. Inflate enough so the the deficit deflates. Inflate enough that the extra stimulus raises the standard of living more, even if the powers that be know it's going to cost us long term. It helps them boost their local economy with "bridges to nowhere" that are made possible by the inflation drug-induced populace. But the downside is that at some point, the drugs of the overly active Fed wear off. Industries disappear. Inflation turns out to be selective -- labor goes up faster than the avg., so some products are subject to higher inflation: health care, road construction, education, for example. So as we age, our "formula for success" has ensured that we are priced out of world markets for manufacturing, and the thing we need as a culture -- health care, education for our grandkids, and repairs to our infrastructure -- are all escalating in price much faster than our incomes. Inflationary policies have enabled gov'ts at all levels to take a bigger chunk of our check as we're pushed into higher tax brackets or simply by using inflated incomes to mask a greater percentage going to gov't. But as wages stagnate, it will be ugly because the inertia of gov't to grow is deeply ingrained and enormous. I'm not nearly smart enough to know if the Fed should be abolished, but I do realize that any institution which creates great long term damage at the expense of short term gains is one which was not serving the people who pay their salaries. In the past 30 years, the top 1% have seen incredible gains in wealth the US, and the top 10% not so great but truly spectacular anyway. The lower middle class and lower have gone backwards. From that, I can tell who is being served.