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

To: carranza2 who wrote (25245)	12/5/2009 10:44:48 PM
From: Real Man	1 Recommendation Read Replies (1) \| Respond to of 71456

A lot of people seem to be trapped into thinking that inflation will not be a threat due to high level of indebtedness. That includes Ben Bernanke, who is printing like there is no tomorrow and is confident there will be no consequences. After a far milder policy response to Y2K internet bubble bust, oil went up 15-fold, and the economic + employment growth in the US remained tepid at best despite inflating housing bubble. The truth is, the blown up credit bubble has been offloaded onto the government's balance sheet and is now being monetized. So, the funding crisis seems to be next. It is ugly, kind of a version of currency crisis in slow motion, but this is how Keynesian systems die. Examples (of simultaneous financial/banking and funding/currency crises) in other countries are too plentiful to mention. It is stagflationary. Employment never returned to Y2K levels during 2003-2007 bull market. Bernanke made it clear he will keep printing and ZIRP forever until unemployment improves. This will likely have very adverse consequences, since all that money is now exiting US via ZIRP and creating an economic boom elsewhere. Even without the carry trade things would likely turn ugly.

To: carranza2 who wrote (25245)	12/5/2009 11:05:30 PM
From: Real Man	Respond to of 71456

FWIW, during the decade of the 90-s, gas prices did not change much. Filled for a buck in 91, filled for a buck in 2000. Filled for $4 in 2008, now it came down thanks to depression, but I remember 77c back in the late 90-s or early 00-s. In the early and mid 00-s of this lost decade a steady rise commenced. All the bills you have to pay - and no, I don't believe for a nanosecond this was due to "peak oil". It was due to easy money (easy credit, in that case). Now money is free and more of it is created out of thin air every day. There will certainly be a huge price to pay for Ben's actions, and, as you mention correctly, this liquidity is unlikely to be retracted. Besides, many are aware that inflation statistics is "doctored" thanks to entitlements being tied to it. If it is understated, how can we count on the Fed to keep real interest rates positive? Gold went up on persistentently negative real rates, just as it did in the 70-s. Normally this is inflationary, although everything is pretty much 10 standard deviations lately.

To: carranza2 who wrote (25245)	12/6/2009 2:17:35 AM
From: RJA_	1 Recommendation Respond to of 71456

>>Housing will take a very long time to recover. Stimulus will be necessary. Inflation is unlikely to be a threat because velocity will probably remain low. The cost of the wars and the insane defense budget will keep deficits high. Because it will be difficult for growth to get going in a non-stimulated way, taxes cannot be increased in any substantive manner, except, of course, on estates, which will be taxed to a fare-thee-well as the Boomers' parents die off and the biggest generational transfer of wealth in history takes place. How can inflation remain low with a declining USD, and most goods being imported? IMHO, this cannot be, and therefore will not be. We will have inflation until we manufacture here, and even then, declining USD will raise the cost of raw material inputs. >>It is all very grim. Kinda like the last year, except to the nth. And that is why I like gold. On this we agree.