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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 (62954)	6/7/2006 12:42:34 PM
From: westpacific	Read Replies (1) \| Respond to of 110194

The FED has no control over the coming deflation. Do you get it. Middle East, Russia, Europe......they control our direction. Mass selling of T-notes, dollars, stocks. Anything that has to do with dollars and America. Down we go, as in deflation. West

To: GST who wrote (62954)	6/8/2006 7:20:06 AM
From: shades	Respond to of 110194

Bernanke cannot chose deflation, he can only decide how to best to deal with inflation. bankdersysrisk.blogspot.com What I expect to happen during the process is that the other countries with huge asset bubbles, I think this is a large percentage of all US trading partners, will experience the deflation of their asset bubbles at about the same time as the US for similar reasons. The bubbles are falling under their own excessive weight. As these countries go into a banking crisis they shall start to bail out their banks by printing money. I would say borrow money, but who could you really borrow from. Even if you did borrow money, it is really just that country monetizing their debt in order to extend credit at this stage, and this would just add to the supply of money in their country. This will effetely cut off effective borrowing. Not that countries won’t borrow from each other, just that the borrowing is really monetizing the debt instead using money from savings. This will cause a situation whereas money is created in both economies, the lender and the borrowing economy, increasing the money supply in both countries. In this period I also expect democratic governments to increase spending on public works, military and social programs. In no way will the governments reign in current spending. As the US dollar is the most widely used currency on the planet I would also expect to see foreign banks dumping US assets as they shift away from a US dollar standard to a basket of currencies. This will flood the international market with US securities, discounting them, and devaluing the purchasing power of the US dollar. As the US dollar is highly overvalued in purchasing power I would expect to see the US dollar fall faster than other currencies. This will in effect make it cheaper to produce things in the US again and rebuild our manufacturing base. The US negative trade balance with the world will also stop as countries start selling things to other countries. This will eliminate the negative trade balance and give the US a positive trade balance eventually. The US government has expanded its spending with GDP growth induced through the assumption of debt. This spending will not be reduced, but increase during the crisis. Government spending will now inject US currency into the US economy and into the US currency general circulation within the country. US dollars will be returning through the foreign banks divulging themselves of US securities. Therefore even though I agree with your argument for CPI and PPI, I think that the international banking system and our own government spending will bring too many dollars into the country, bring with it hyperinflation. Until the US gets a firm hold on its spending, gets rid of many social programs, public works and such, then the US is in serious danger of chronic hyperinflation for years to come.