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

To: John Vosilla who wrote (66819)	7/25/2006 1:42:45 PM
From: Mike Johnston	Read Replies (2) \| Respond to of 110194

The fact that the entire curve is below true inflation rate will cause the inflation rate to accelerate. Then, to prevent long rates from spiking, the Fed might start monetizing the long end. That would be the beginning of the end game. There are a lot of variables here, namely Fed policy and what the public will do. Greenspan pretended to be a hawk to get the job and turned out to be a dove. Bernanke pretended to be a dove to get the job and could turn out to be a hawk ? Possible , but not very likely. IMO he is a dove, big time.

To: John Vosilla who wrote (66819)	7/25/2006 1:54:40 PM
From: Mike Johnston	Read Replies (1) \| Respond to of 110194

We might get only a stagflationary recession, as you say, but that would be the best case scenario. It assumes that people will passively continue to be fooled and pounded with bogus CPI, a slow dollar leak instead of the crash, and no shock coming out of Asia. The other scenarios are deflationary depression/hyperinflation, the matter of debate being which occurs first. With millions Joe Publics having hocked their houses to the bank in excess of what those houses are worth, the big question is how far the Fed will go to bail them out. The magnitude of such bailout might be much bigger than 2001-2003 bailout. Each subsequent bailout must be bigger, because the imbalances get bigger each time.