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

To: TH who wrote (12377)	10/5/2008 11:59:29 AM
From: Real Man	2 Recommendations Read Replies (2) \| Respond to of 71475

TH, Here are some more positive non-panicky thoughts (I'm in a better mood today <g>) 1) I think the global CBs recognize the problem, which is global, and act in a cooperative manner. Their goal (I hope!) is to work off the global imbalances over time, as opposed to a quick meltdown. The gradual dollar devaluation was engineered with the goal of bringing US current account deficit down. I think BIS, and, by extension, the Fed, are quite aware of the problems we are facing (although sometimes I do doubt that), but they do get into panic mode, they are human, and make mistakes. The mopping up after crisis technique is really silly. 2) I believe CBs are not stupid, and are quite aware of inflationary implications of incessant printing, and deflationary implications of leverage/credit contraction. Thus, Ben is NOT monetizing all the debt. The attempt of CBs is to limit the pain of deleveraging, but deleverage we now must. 3) The banking crisis is very acute right now, so the first goal seems to be to stop it at whatever cost, and deal with that cost (inflation) later. Panic selling of the dollar is also a concern of the CBs, and they are acting in a cooperative manner to prevent this from happening right now, as it won't be good for anyone. Whether or not they succeed is a good question. In particular, I am not very fond of that latest bailout effort, as it does not cure the problem and will lead to more problems down the road, as Stiglitz noted. In my simplistic view, they are stimulating the wrong part of the economy (Wall Street) and could grow more Berserkers who bid up everything in price later on, while the real economy will continue to suffer from increased price pressures on the raw material side, and the lack of demand from folks like you and me. The job losses on WS were NOT the worst. They were the worst in the Auto industry, which suffered due to both credit contraction and high oil price. 4) If they do succeed, then the global imbalances (US current account deficit, etc.) will dissipate over time as opposed to suddenly, and the global economic growth will continue, albeit at slower pace. US will face a recessionary/slow growth environment for some time with higher inflation. The current account deficit will have to reverse. The financial part of US economy will have to shrink, while the real part will have to grow. 5) It was quite puzzling for everyone that while the value of the dollar decreased, the current account deficit grew. The process is now reversing, so, if the effort is successful, hopefully, the imbalance will be gone, and the dollar stabilizes and starts to appreciate at some point. In other words, if acute crisis dissipates, I am just advocating stagflationary environment for some time, due to combination of deleveraging and printin' If they screw things up more, things could get much worse -g-

To: TH who wrote (12377)	10/5/2008 12:18:03 PM
From: Real Man	Respond to of 71475

By the way, good questions, I have the same questions Making choices is Ben's and Hank's job. We just have to follow the choices they make. -g-

To: TH who wrote (12377)	10/5/2008 12:33:01 PM
From: dybdahl	Read Replies (1) \| Respond to of 71475

The German media portrays it as "The crisis has hit us with full power now, too". Their politicians seem to be very willing to put a lot of money at stake to keep their financial sector stable, but they're also extremely focused on inflation. The Irish made a selfish move, protecting their own banks with a state guarantee, while not protected Irish banks owned by foreigners. They will lose this at court, but in short-term, they probably achieved what they tried to achieve. The Danish media portrays it as "There is a world crisis, it will hit us, but we're well prepared for it". Generally, it is attempted to make the banks pay all costs of saving other banks, avoiding tax payer involvement. Denmark just came out of paying back hue debts, so we don't fear problems. Nobody believes in hyperinflation etc., and Warren Buffet doesn't either, it seems, but the general attitude that I see with business people is, that if the economy of USA breaks fully, we just need to work around that. We've had WW2 and other things, and a failed USA won't kill our populations or flatten our cities. I just saw a German TV program about young people, where they ask them: What does it mean to be German? And they all referred indirectly to WW2 in their response. It's surely still in everybody's minds.