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

To: russwinter who wrote (51134)	1/24/2006 8:48:40 AM
From: shades	Respond to of 110194

that people actually need, will move much higher in the US. pigman at the top - the lawyers and bankers in congress and such - know that J6P will vote them out of office if things get too expensive for the sheeple - what do you foresee as thier attempts to stop this? More protectionism ala schumer? more funny business with playing with CPI calculations? El Mat says brazil self reliant with Sugar, turning inward for its citizens needs of energy and such. I just see some oil expert on CNBC say we need to turn to shale - Elroy says not gonna happen anytime soon.

To: russwinter who wrote (51134)	1/24/2006 11:37:38 AM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

"In the likelihood that money flees US securities and the USD, then prices paid for things that are necessities, that people actually need, will move much higher in the US. The prices of things people need to get rid of because they are overleveraged in them will fall." Exactly.

To: russwinter who wrote (51134)	1/24/2006 12:30:41 PM
From: bond_bubble	Respond to of 110194

Russ, When there is going to be a currency crisis, why do you think the Fed/Govt will support it? By that I mean, let's say the FCBs and Foreign investors try to pass on the ABS and MBS to others as hot potatoes and the US govt/fed/hedge funds keep paying interest on those bonds? What happens if they default on these loans? US Govt will say, they will not default on UST - they will support the soverignity of UST - but not the AGency bonds. Suppose this were to happen, what actually happens is that even Chinese banks will start failing. All financial institutions in Asia and US will be failing - And do you still think people will want to buy the Asian Bonds? Remember, all these credits need to find a home. Only then this run on dollar etc happens. If default happens, all the credits are extinguished and they need no homes!!! In the defaults scenario, I dont think there will be a run on dollar. There could be some depreciation - say 30% (I dont know against what). This is what happened to pound in 1930s when they defaulted on gold standard!! I think one of the major assumption everyone is making is that all the credit created are supported by income. It is not. There is no interest paying capability to support these credits. Which means it should default. Why will Fed print money and give it to these guys and ask them to pay the interest so that the run on the dollar can be encouraged by Fed? I believe this is why the 1930s govts chose default route. This removes the run on the currency and the high PPI that comes with it...And I believe, even with all these defaults, the PPI will stay stubbornly high!!! And that is why the FEd will choose the defaulting route to bring PPI manageable!!! Suppose USD falls 30%, do you think Chinese will sell the goods at 30% less in yuan? The crisis happens when: 1) THe Chinese/Asians can no longer squeeze productivity from their factories (until now they have squeezed about 25% in the last 10 years). OfCourse America has lost the productivity in its soil and that is why they are paying Chinese to provide that productivity. 2) Everywhere in the world, there is no productivity squeezable. In such a scenario, why would US create any more credit? Because credit does not provide any more productivity, instead it goes straight into inflation (PPI)!!! This why defaults happen. There is just no point in creating credit - as it will only worsen the unemployment...