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

To: Killswitch who wrote (11156)	9/16/2008 9:10:17 PM
From: Real Man	3 Recommendations Respond to of 71463

The similarity is debt destruction, deflationary credit crunch. The difference is US cummulative current account balance, which, unlike Japan, has been increasingly negative. Also note a seminal event, the collapse of the Soviet Union in 1990-1991, which happened to coincide with the Japanese deflationary environment. That resulted in cheap dumping of commodities on the World markets (due to internal hyperinflation), suppressing their prices that were already in a bear market environment. I guess the difference is whether the debt crisis spreads to the government securities or not (the treasuries). I believe the US government finances are in a very bad shape, so it likely will, resulting in a currency melt. A government rarely defaults on its debt denominated in its own currency (it only happened in Russia <G>). Rather, it prints money. However, both events result in a currency meltdown. A crucial difference of US situation with the currency crises elsewhere is that US foreign debt is denominated in US dollars. Thus, government finances don't deteriorate when the currency collapses. Rather, foreigners bear the currency risk. However, USD is vastly overowned by foreigners, making up to 2/3 of all foreign currency reserves. This makes it a unique situation.

To: Killswitch who wrote (11156)	9/17/2008 4:33:28 AM
From: GST	Respond to of 71463

Japan deflation was driven by: (1) Their massive current account surplus, (2) Their extraordinarily high savings rate, (3) Counterproductive government spending on meaningless pork barrel projects crowding out personal consumption. USA inflation is driven by: (1) Our massive current account deficit, (2) Our unwillingness or inability to have of any net personal savings, (3) An overhang of debt on an almost unimaginable scale that requires continuous loose monetary policy to keep our economy from imploding -- the implosion of which would cause a massive withdrawal of foreign credit and a collapse of the dollar. Under current circumstances we can expect inflation to range from moderate to extreme. It is almost impossible to develop a logical scenario in which the US dollar escapes the consequences of the fundamentals of our economy. There is no credible deflationary scenario. We are defaulting on our debts. We will rack up new debts. And we will default on those debts. Our preferred method of default is called inflation.