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

To: mishedlo who wrote (70809)	11/2/2007 5:24:24 AM
From: Real Man	Read Replies (1) \| Respond to of 116555

Depends how bad things get. As the dollar falls, US will be gradually priced out of the global markets as the biggest consumer. That does mean deflationary effect on the world, but we won't be able to feel it in the US. Prices for food and oil will, quite likely, continue to rise even more sharply, in USD. Disorderly dollar drop is very likely if the Fed continues to lower the rates. We are seeing it now - inflationists see very high oil and gold, priced in dollars. In CAD, on the other hand, oil did not exceed its 2005 high.

To: mishedlo who wrote (70809)	11/2/2007 5:55:41 AM
From: Real Man	Read Replies (1) \| Respond to of 116555

There is a limit to the dollar drop. The US international investment position will naturally increase as the dollar drops, while that of the World in the US will decrease, at least relative to the US position. Both of these are large. Right now we owe net about 2.9 Trillion, that despite much higher accumulated trade deficit (6 Trillion?). However, I would expect foreigners to be kicking and screaming as this occurs -err - selling dollars, as they get cheated out of their hard earned green cash. For some of these countries the reserves are quite significant, compared to their GDP. The key to hyperinflation will be if BB and his Fed prove to be willing to monetarize the bad debt in huge quantities as stuff hits the fan. I tend to agree, probably not. However, with M3 growth of 15% so far I would not count on deflation, and it won't be allowed to deflate at all. After all, BB does have the printing press. They will use it. It might not be enough, and the economy will be stuck in bad debt for a long time, but they will.