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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (100636)	8/10/2009 8:05:26 PM
From: philv	Respond to of 116555

The US would have to print dollars even faster than everybody else. Problem is, the rest of the world can add zeros just as fast. Another problem is they all want a strong dollar so that their own industries have an advantage in world trade. The strong dollar is both a blessing and a curse for the US it seems.

To: mishedlo who wrote (100636)	8/11/2009 12:01:47 AM
From: ItsAllCyclical	3 Recommendations Read Replies (1) \| Respond to of 116555

Mish I agree w/most of your work. While I may agree w/many of your overall points to play devil's advocate I submit the following: 1) Hard assets at first, other currencies later. 2) No need, not really part of the plan 3) True, but those currencies are not over owned as % of bank reserves on a world-wide basis. 4) True, but again see #3 5) They don't know anything else. Preserve the status quo. I don't think the Dollar will fall 50% i one day/weekend, but I could see it falling that much over the next 5 years. 6) What options do they have at this point but print money. They've proven again and again NOBODY is willing to make ANY hard choices. 7) You're assuming they give a rat's ass about the common man. As long as the banking system (power) is preserved who cares if they crash the real economy. They'll just buy everything up for pennies on the Dollar and reissue a new currency. We're looking at Japan, Argentina, Zim., but maybe we should be looking at the Pound prior to the Great Depression. Although I doubt even the Pound at it's height achieved the same status as the US Peso cerca 2000 as a % of world-wilde bank reserves and % of global GDP. Is there really a precendent out there? Again I agree w/many of your main points w/respect to deflation and the velocity of money, but in the end it's really a confidence game and it comes down to marginal increase in demand/supply (think oil in late 2007, but only in reverse). A likely scenario may in fact be a harsher version of Japan's lost decade, but we could just as easily see a scenario where things spiral down, confidence is lost and we repudiate our debt (Faber). I think one has to be open to several scenarios here and constantly checking the financial weather. Keeping one mindset is a good recipe to lose one's ass over the coming years if you're wrong. Thanks for the great blog work. Hope you continue to get more clients to suit your needs/desire.

To: mishedlo who wrote (100636)	8/11/2009 2:32:01 AM
From: Amark$p	1 Recommendation Read Replies (1) \| Respond to of 116555

Thanks for your comments. ItsAllCyclical gave a nice response. From your blogs and charts, I know you keep in contact with Chris Puplava, who recently posted this: financialsense.com "If the U.S. economy can not stand on its own two feet without the monumental support of the government and current programs to date are merely slowing down the rate of descent in the economy, what tool is left to use? Perhaps the key lies with one of the last tools in FDR’s tool box, that being a devaluation of the U.S. dollar. As was seen in the Great Depression, once FDR devalued the U.S. dollar the economy began to turn around as deflation was arrested and exports picked up as U.S. goods became cheaper to the rest of the world. One of the most dreaded words to central bankers is deflation as debt remains a constant while asset values decline in recessions, thereby increasing leverage in the system unless the debt is either defaulted upon or paid back, while inflation makes debt cheaper as it is serviced with cheapened currency. A devaluation of the USD would have several perceived benefits. As mentioned above, it would help revive exports and also make servicing our debt easier, and it could also have the knock on effect of causing consumers to spend more rather than sit on their cash whose value is eroded. Already the sell off in the USD appears to have helped to stabilize exports which have risen from the low seen in January of this year... So, if the Fed continues its MBS buying program to help contain mortgage interest rates and provide liquidity to the mortgage market then it may help to alleviate the potential for an Alt-A and Option ARM reset shock. Moreover, by expanding its balance sheet to do so the Fed may also produce further weakness in the USD and ease deflationary pressures as a weaker USD leads to rising import inflation. Thus, by expanding its balance sheet to continue purchasing MBS the Fed can help to keep rates low but will do so by sacrificing the USD, which may in fact be the Fed and the Obama administration’s plan to begin with. In terms of reflating the economy, side-stepping another mortgage crisis while spurring rising exports via a weaker dollar may kill two birds with one stone. " As one of your blog readers, it would be much appreciated if you could discuss this US$ devaluation scenario with Chris P and others and create a blog with your insights. Thanks.