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

To: pogohere who wrote (75536)	12/13/2006 2:41:49 PM
From: GST	Read Replies (1) \| Respond to of 110194

<C'mon: how are consumers gonna buy that stuff under your scenario? And if you think they won't be able to, what will happen to prices?> Ford can go bankrupt -- lots of companies do. The former employees can go bankrupt, although they are more likely to have some money stashed away as they did ok for a long time. But lets assume they go bankrupt and the towns they live in go bankrupt. Who on the selling side is going to want to sell them anything? Not me. Not most firms in places like China, although to the extent that the bankrupt can buy anything it will most likely be stuff from China. The world is full of bankrupt or poor people -- and nobody gives a rats ass about them -- what is a few more? Or a million more? Or ten million more? Growth has shifted away from us -- this is not conjecture -- it has already happened. The world does not owe us a living. We came, we squandered and we can leave. Instead, sellers will turn to people with money. While we spent every nickel and then some, other people saved their money. The average person in China saves nearly 45% of their income. Japan 25%. The US zero. Ask anybody from a major company where their growth will come from -- they won't say it will come from some laid off guy in the US. They will point to the hundreds of millions of people in other countries who happen not to be broke. If you think that the most wasteful, short-sighted and self-important country in the world is somehow on a pedestal with everybody bowing you are wrong. We are the patrons in a bar -- when our pockets are empty and when we are of no further use to the bar, we will be tossed into the alley and they won't feel too sorry for us either. In my lifetime China's economy will grow to be larger than the US. Many people in the US will do just fine -- the educated elite. But many, including the Ford employees you mention, will be eating in soup kitchens or paying 20 bucks for a burger at McDonalds. The slower our economy grows (or the more it contracts), the harder it will be to carry our debts -- and the debts will do nothing but grow. The fate of the dollar is sealed by the trillions we owe and the tens of trillions more we will owe in coming years. The dollar will be crushed by our debts -- the economy will slow and prices will soar. In a word -- stagflation. Our fate as an economy is tied to the dollar. If you like you can spend your time wondering whether or not the opposite might happen -- you can wonder whether the purschasing power of our dollar is set to soar. That is up to you. But such a deflationary scenario defies the reality of the most basic aspects of our situation, and to even contemplate it requires that you drink the coolaid and pretend that inflation is not prices, it is money supply. It requires absolute faith in the Fed as the only body in the world that can control money supply -- lets call it the church of the Fed. Many here attend that church. You will not be alone. To me this church is a cult. I would prefer to focus my attention on markets and the tough realities they have in store for us.