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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Seeker of Truth who wrote (5209)	4/3/2006 12:29:34 PM
From: energyplay	Respond to of 218621

Yes, inflate your way out of debt by issuing more monopoly money....especially with progessive taxes ! Consider that the US Federal government has issued about 1500 Billion in debt in the past 5 years. With the large Asian purchases, the interest rate was about 4.3%, a Euro about $1.15, and the Yen at about 117 to the USD over the 5 years. At the exchange rates, prices in the US were held down by external trade, or "the US imported deflation" A what-if scenario - Without the very large purchases from Asia, the interest rate would have been about 5.5 -7.5 %, and a Euro would cost $1.35, it would only take 95 Yen (JPY) to buy a USD and the expanison of the money supply considerably less. There would be about 1 1/2 million fewer foreign cars bought each year in the US, and about 1 million more domestic cars sold. Note the total market would be smaller because the US and world economies would not have grown as much. Large sum of money have been pushed into the USD to keep the Yen, RMB, and other Asian currencies low vs. the USD. Much of this money was absorbed as US govenrment debt, instead of buying golf courses. When the Asian buying slows or stops, payments on the Treasury bonds to reduce the debt will push currencies the other way. The weaker USD will mean that prices of goods (and some labor) will rise in the US, and Federal tax revenues will increase much faster. If Federal spending is held in check, the federal budget defict will drop to a few billion (maybe even surplus like late 1990s), allowing the Federal reserve to stop or slow the expansion of the money supply, thus avoiding the continuing decline in the real value of the USD. ******************** Maybe 10 years from now, we will know if these "experiments" were worthwhile, if there are net long term gains to the world economy. the experiments - 1) Central banks NOT attacking the dot-com / telecom bubble, even when seen as a sign of "irrational exuberance". 2) Tightening of money and drop in liquidity across Europe in run up to the introduction of the Euro. 3) Large liquidity injections in anticipation of Y2K and year 2000 terrorist attacks. 4) Massive liquidity response to September 2001 terrorist attacks, and post bubble slump. 5) Massive currency price manipulation by Japan, Taiwan, China to increase export competitiveness. 6) Large tax cuts without even partially equivalent spending cuts to stimulate the US economy post bubble and post attack. 7) Very delayed central bank action on real estate assets bubble (US, UK, Australia) Note Europeans have not been the main players in these games. We will see if their societies get a long term benefit or loss from this.