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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (49707)	4/16/2006 8:04:17 PM
From: regli	Read Replies (1) \| Respond to of 116555

"In liquidity crunch induced by carry unwind, do all things sink into the abyss? Is there that single momentary juncture when nothing will do except paper money?" I consider that highly unlikely though it could happen for a short period of time. If we were to see such an occurrence, I believe, we would for the first time see official, fully coordinated action by the Central Banksmost of most developed countries to inject liquidity into the system. I am not saying that this new liquidity would solve all problems but it would cushion the blow and prevent everything from falling. If everything were to fall, the financial system would collapse including all paper currencies. Deficits would not go away but who could afford the taxes? Contracts would still be in place but who could pay for them? Reflation would be tried with unimaginable vigor and with support from just all sides as very, very few and definitely not the powerful would profit from such an event.