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

To: forceOfHabit who wrote (100658)	1/14/2009 12:28:27 PM
From: carranza2	1 Recommendation Read Replies (2) \| Respond to of 110194

No such thing as equiibrium in a financial system, just different degrees of volatility. The problem is velocity; there has been a tremendous infusion of cash into the system which is not moving. It will move, and when it does, inflation will be on us. The infusion of cash and credit will one day work, probably in the second half of '09. Then, inflation hits us just as we think we've got this thing licked.

To: forceOfHabit who wrote (100658)	1/14/2009 6:04:13 PM
From: Hawkmoon	1 Recommendation Read Replies (1) \| Respond to of 110194

FOH, Deflation is twofold, prices and money supply through loss of financial velocity and/or debt default. Cheap credit, but based upon sound financial lending practices (to avoid how we got here in the first place), as well as loan mitigation to bring down economic servicing costs of existing debt to free up discretionary spending budgets should help greatly. Despite the huge quantities of liquidity the Fed has pumped into the system, it would seem that the diminishing velocity of transactions has kept pace and negated that effort. That's all due to consumer confidence, as well as tightening credit (despite low rates). If a trillion dollars in money is changing hands 10 times a year, that's $10 Trillion in financial activity. Reduce that activity by 50% and now you need $2 Trillion in liquidity trading hands 5 times a year to maintain $10 Trillion in financial activity. Thus, people need access to credit because debt represents creation of money and when spent represents financial velocity. It's imperative to restore consumer confidence by creating jobs related to sound infrastructure and R&D projects that are investments in our economic future, provide the $$ to retrain/re-educate displaced workers, and possibly help people in reducing their existing credit card interest rate levels so they are less likely to default. And I think much of this credit mitigation should be across the board, not just to those who need it most. Demand creates higher prices.. Right now we have too much supply, overstocked inventories, and not enough credit or cash available to convince the consumer to buy anything but the bare essentials. Hawk