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

To: KyrosL who wrote (87982)	10/26/2007 5:43:34 PM
From: GST	Read Replies (1) \| Respond to of 110194

When the asset that is falling is the one that funds your consumption -- yes, absolutely, that is inflationary. The dollar is the primary asset that is plunging in value -- and that means you are paying more. But people have also used their houses as their funding currency. House prices are secondary to the importance to the dollar, but they have been a source of funding for consumption. Your house appreciation does not buy you a car like it did two years ago. When you could get "free stuff" cause your house was going up in price (which you then 'extracted' to make purchases), the cost of buying a new car was zilch. Likewise, a strong dollar kept import prices from soaring. Those days are gone. You can no longer use your house to pay your bills -- but your bills are still there and you must pay them. When you have something whose value is declining (home equity) and you rely on that thing to trade for goods and services, then you are experiencing the rising cost of buying things. That is inflation. Your house can no longer hold its value. Nor can the dollar. We are in an extraordinary inflationary spiral.