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

To: glenn_a who wrote (90850)	1/27/2008 12:35:19 AM
From: sea_biscuit	Read Replies (1) \| Respond to of 110194

I don't think financial assets will inflate so much as track the higher rate of inflation or maybe even lag it. You could say that they would deflate - when measured in terms of real money, i.e. gold and silver. As for the ECB, it is only a question of time before they have to cut rates. Right now, Trichet is talking tough, but it is not as if they don't have any problems. Though in fairness, I would say that most of our problems, we have brought them upon ourselves whereas in ECB, it is mostly due to circumstances probably beyond their control. But the bottom-line is that they have problems too. IMO, a deep global recession is unlikely. China and India will continue to grow. Only 20% of China's exports are to the US, and they will come down but can't go down to zero. China exports more to developing countries than to developed countries. If China lets yuan rise (which they might so the export of inflation from the US can stop) then oil will become cheaper for them. That will boost their economy further. As to foreigners not buying US debt, that will happen too. But that would make the long-term yields higher which works in favor of the US financial institutions which are being rapidly re-capitalized. That is yet another factor that can drive stock prices higher.