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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (67308)	8/8/2007 1:40:33 PM
From: NOW	Read Replies (1) \| Respond to of 116555

This quote from your missive:'The key in all of this is not inflation, as most believe. The Fed says they are most worried about inflation risks, but the reality is that they are most worried about deflation risks. Always. Always deflation. The Fed has no choice but to always remind us that the risks are tilted toward inflation, just as the Treasury Secretary, whichever one happens to be in office at the time, must always say that the U.S. maintains a strong dollar policy, even if monetary policy and fiscal policy are conspiring to devalue the dollar." is key. most simply seem not to get that.

To: mishedlo who wrote (67308)	8/8/2007 3:24:22 PM
From: Crimson Ghost	Respond to of 116555

Mish: I agree that deflation will be the end result of all this nonsense. But where I differ from you and Trotsky is how bad inflation will get before the bubbles burst. You seem to think we are in the ninth inning -- I say we are barely in the fifth inning of this inflationary cycle. The fact that treasury bonds rather than gold were the main beneficiary of the stock selloff suggests that the CBs have plenty of leeway to inflate further. Only when gold displaces treasury bonds as the main beneficiary of stock market weakness will we be near the end game IMHO. As it stands now I still expect a major stock market selloff when this rally ends. But not an "end of the world": selloff --perhaps something on the order of 10-15%. But stocks could well be at new all time highs by late 2008 unless the markets (bonds and gold) seriously restrict the ability of the CBs to inflate at will.