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

To: kris b who wrote (75876)	12/17/2006 2:03:42 PM
From: russwinter	Read Replies (4) \| Respond to of 110194

<What is the transmission mechanism from the credit creation (which asset class can be still monetized) to the cash register? Anyone?> Sure, I can explain. This weekend I am sitting on a bunch of Treasury bills, let's just say 7 digits worth and leave it at that. You could substitute agency notes, or asset backed securities for other individuals. I have held mostly T-bills since early 2006, because I've thought the Wizards (monetary authorities) were starting the process of acting semi-responsibly with the printing press process. In fact I could be found on on here, grudgingly singing some praises, and that despite their lyin' ways. Also 5.25% in relative safety, seemed like a good proposition. There was even one two year auction, that I would have bought at 5.30%, except it went at 5.22% instead. I didn't want to speculate on my prior winning commodity and precious metals stratagies any more, figuring they were higher risk. I was critized and certainly questioned by some here for that. In the back of my mind, I was even buying into the abatement of inflation nonsense at the time, or at least entertaining it. However, lately I have been getting that uneasy feeling that I've been fooled. There are more and more signs of printing press activity such as five coupon passes in two weeks, and $31.4 billion in FCBs monetization in two weeks. The yields on my Bills are dropping and so is the USD. Wall Street is all jacked up for another EZ money credit cycle. What are my options? I could let the bills mature, take the cash, and convert all into gold, but gold pays no return, and am still worried about Riskloves exposure in it. Maybe Swiss Francs? can get a little interest, maybe a prospect? I'd probably end up on some Homeland Security list though? So actually another option enters my mind if things keep progressing this way. Why not just spend it on useful items, while the money still has value? And if 4.75% mortgages end up being offered, why not just get a fifteen year mortgage, and buy a dwelling? It's called Flucht in die Sachwerte (flight into real goods). It would take more than feeling fooled for me to actually 90 or 100% follow through on it. I'd have to see additional signs, but you should get my point?

To: kris b who wrote (75876)	12/17/2006 3:27:37 PM
From: J_Locke	Read Replies (1) \| Respond to of 110194

There are two ways to create hyperinflation in a modern economy. First, the Brazilian way, which is for the government to massively increase the money supply while simultaneously requiring employers to increase wages to keep up with the inflationary loss of purchasing power. The second way is for the government to issue "tax rebate" checks to the populace while the central bank monetizes the deficit spending required to pay for the "rebates". Neither seems particularly likely to happen in the U.S. on more than a modest scale. I do expect the Fed to eventually monetize large amounts of mortgage-backed securities, but it's not clear what the effects will be on the general price level.