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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (5355)	3/21/2008 10:20:24 PM
From: Real Man	Respond to of 71456

It's one of the ugly choices for the Fed, not fun at all. The other choice is to allow debt and currency collapse, raise the rates, and endure a deep economic crisis, with a manufacturing-led solid recovery out of the crisis. The Fed is out of good options. Hyperinflation causes a collapse of the real sector. We are not yet there, so they can push inflation higher at this time. We'll likely have a combination of the debt collapse and Weimar, exactly what financial and currency crises are about sjsu.edu

To: Tommaso who wrote (5355)	3/22/2008 6:31:19 AM
From: Real Man	Read Replies (2) \| Respond to of 71456

Personally, I don't think we'll be going hyperinflation way. There is little to support such completely reckless Fed behavior at this time, and I have not given up on Ben, even though I don't like what AG did to our country. He is NOT dumb, he is fighting this, he is aware of imbalances, but all options really suck, so he is trying to go the middle less sucky way. He has some models to do that. There is little to support hyperinflationary printing at this time. While the current account deficit did not decline significantly so far, there is some positive change in its structure. The imports of manufactured goods from Asia did drop a lot, and exports did rise. Now the main component of the deficit is oil and energy. That too is set to decline as the global economy weakens. No, we are not out of the woods yet. However, as I noted earlier, the trends in manufacturing employment are somewhat misleading, they are definitely global. Manufacturing output stayed the same, which means productivity rose. While Chinese labor is quite a bit cheaper, no doubt, their productivity really sucks. China is also a communist country (A forgotten truth?) Thus, it is a huge political risk for those who try to move manufacturing facilities there. Can these facilities be taken over by the communist government? You bet! No doubt, we are in for some mess, but this too shall pass. No Zimbabwe, hopefully. 70-s, but worse. The term is "stagflation" - restructuring of the economy, and a move from Ponzi finance to manufacturing as the dollar declines. The process is positive, but painful.