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

To: GST who wrote (91207)	2/4/2008 8:52:02 PM
From: glenn_a	Respond to of 110194

((The bursting housing bubble weakens the dollar -- the value of the dollar is far more important than US demand in determining US inflation rates.)) That's very interesting. I hadn't thought of it that way. So some interesting relationships follow to me: 1 - In the short-term, the US actually gets the better of the deal. In that foreigners originally exchange their hard-earned foreign currency for US$ financial assets. But then the US$-denominated financial assets fall in price, and foreigners don't even get their original purchasing power back. 2 - However, longer-term, unless the buying of US financial assets is politically motivated, why would you continue to buy US financial assets after getting burned so bad the last time 'round? I can see this making holders of US financial assets much less willing to hold them for fear of the inevitable loss of purchasing power. Thus leading to broad-based selling of US financial assets, and an excess supply of $ generally. Have I got this about right? Or are there any key dynamics I'm missing? Thanks, I do believe I learned something today. :) glenn