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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 (71200)	10/6/2006 3:13:14 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 110194

Luckily for the U.S. the debt is in U.S. currency. For Argentina, their debt was in dollars - so there is a vicious cycle. If foreigners start demanding U.S. debt be paid in other currencies (like what happened in Argentina) ... that would be crushing ... but I doubt that will ever happen.

To: John Vosilla who wrote (71200)	10/6/2006 3:49:48 PM
From: bond_bubble	Read Replies (3) \| Respond to of 110194

So did house prices increase in Argentina in 2002? Did interest rate fall in Argentina in 2002? Did monetary base increase in 2002? Was there no bank failures? Were the people allowed to withdraw money from the banks? Were Restaurant prices increasing? What about Stock prices? What about meat prices??? mises.org The result would be a bank credit deflation that would result in a swift and sharp, one-shot contraction of the money supply down to the level of the monetary base, which is equal to the amounts of peso and dollar currencies held by the public plus the peso and dollar reserves held by the banks. While nominal prices and wage rates would have to be readjusted sharply downward, the value of the peso would rise commensurately, monetary exchange and calculation would be restored, and the allocation of resources and distribution of property titles would once again be determined by market processes. Now is that deflation or inflation or stagflation?? The problem in understanding credit deflation by most of the people on this board is that, most people equate credit deflation as price deflation in ALL prices i.e money is neutral. Money is not neutral. i.e when credit deflation occurs some prices can rise and most can fall!! In 1933 oil prices soared 71% inspite of it not being peak oil year!! Ofcourse, morons like GST will call 1929 as deflation inspite of oil prices soaring 71% and will insist we are not going to face 1929 again.