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

To: benwood who wrote (75548)	12/13/2006 4:22:53 PM
From: GST	Read Replies (1) \| Respond to of 110194

Ben -- you left out one thing in my view -- we don't just buy things, we finance enormous deficits that have already accumulated and we borrow money just to pay the interest. As the economy slows our deficits do not go away and indeed show every sign of worsening. The currency risks in a slow US economy are worse than the currency risks in a growing US economy. The risk premium rises as our credit worthiness slides. The more the economy slows the more vulnerable the dollar becomes. Growth has until now postponed the inevitable. The problem with monetarism is that it fits a 19th century economy much better than a 21st century economy. Monetarists get very confused in discussions where most factors are global and simply wave their hands around and say "well none of that matters because I already know that it is all about money supply and only about money supply". Unfortunately this turns out to be an act of faith rather than sound analysis. You can't get this right if you don't get the dollar right. And you won't get the dollar right without looking at the current account deficit and the extent to which it can or cannot be financed at current interest rates in a major US slowdown.