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

To: Rolla Coasta who wrote (24014)	11/6/2009 12:19:53 PM
From: Real Man	Read Replies (1) \| Respond to of 71409

It's not completely true, printing is levered up. Suppose you have the base of 1 Trillion and are 40x debt-leveraged. You get 40 Trillion Now, the leverage declines to 20x and the Fed prints 2 Trillion. You get 60 Trillion. Indeed, a complicated process, but it's difficult to say who wins. Depends on relative size. I'd say printing is getting the upper hand since March. Then of course, sometimes you start the printing press and interest rates shoot up along with your debt burden. That would be the BK known as the currency crisis. The problem with deflation argument is that in the absence of gold standard the fiat currency itself is debt, zero maturity. What does it mean when a country itself is broke? That does not always happen, thank God. -g-

To: Rolla Coasta who wrote (24014)	11/6/2009 1:19:09 PM
From: gregor_us	13 Recommendations Read Replies (3) \| Respond to of 71409

Remember, that is a false accounting assertion that has become received wisdom among the deflationists who themselves are quite linear and plodding in their thinking. No one disputes, actually, that the magnitude of the credit destruction and the debt destruction is larger than what global governments have printed. Heck, just consider all the underwater RE and CRE that is still being marked at values from pre-crash levels. But the more relevant issue is that the fresh money propagates through the system with all the multiplier and leveraging effects as before. That said, I think that all that's happened so far is we've taken out the acute phase of deflation, and replaced it with a new distortion. Also, it should be noted that the United States--in another nod to the deflationists--cannot experience inflation outside a debasement or crash of the currency. No dollar crash = no inflation. I will leave to a later time whether we can experience a domestically generated inflation as a result of capacity destruction here in North America that would unfold even as the USD maintained good levels of purchasing power. In short, the deflationists are 100% correct in their description of the basic problem. What "most" of them refuse to deal with is the currency. This is why, imo, they really need the USD to rally now b/c if the USD goes lower from here they correctly intuit their thesis will be in trouble. The US is experiencing a deflationary bust, that has followed a reflationary boom. We stopped making stuff, we stopped creating a real economy. The result so far is deflation in US domiciled assets like buildings and consumer goods, and inflation in anything with energy-inputs. see my: The Alignment of Asset Reflation and a Collapsed Economy gregor.us G

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