posted on Jan, 26 2008 @ 12:00 PM
trader, i guess i should have figured that out based on your name.
I just don't think most people have a clue of how dire the economic situation is. We don't have industry to fall back on in a recession like in the
past, the economy is based on financial shananigans and rising house prices, the latter is falling fast w/ the former ( the reflection of structured
finance) nearing the edge. Thus the "recession" the gov't is trying to keep us out of may not be "our father's recession's" . also low
interest rates can not extend credit faster than the pyramid structured credit regime's are collapsing. that is why hyperinflation will be a
political decision IMO dependant on fiscul stimulus plans ( could be a few more to stem unrest) . a credit collapse which is deflationary is the
reason a hyperinflationary response would be enacted.
The intresting thing is perhaps after a brief fall in stk markets nominal values may go back up (if inflation can outpace credit deflation, and
bond's are bailed out), though i would not bet on it. the kicker i beleive is that the currency's will lose another 50% of purchasing power within
3-4 years (unless the fed. govt allows or can't stop a very very severe recesssion to set in where they don't print or hand out enugh money like
mad). and they allow markets nominal values to fall (say to 8000) in that case our currency may be stronger, but unemployment worse, most gov'ts
choose inflation, but the u.s is unique in the fact they may choose to protect the advantage of having the world reserve currency , like they did in
the 80's with volker. also it is more difficult to "execute" inflation when simultaniously so much credit is deflating. 2 much uncertainty's but
no option will be good.
the following paragraph is filled with run on sentences and tons of speculation (may want to skip)
Most people's because of the way they are "wired" will think the markets are a decent place to put their money if they see nominal values steadily
rising , EVEN IF the decrease in purchasing power (value of currency) is falling much faster. It is the sneakier more deceptive way. so it is wise to
keep aprised of , whatever should happen. Although if all currency's are being devalued against gold the u.s may be more eager to attempt inflation
, since inflation (depreciation of the dollar) would not be reflected in the DOllar index like it was this year, because all currency's would be
being devalued simulationously, and thus the role as world reserve currency would be safer with less benefit of backing out of $ (if worldwide
recession and rate cuts occur) with the drawback being when each are compared to their rising price per ounce of gold, it would be obvious, however
central banks are notorious for depressing the price of gold via the hidden hand in gold derivative markets and dergulation of gold leasing standards
(allowing supply to be artificially stimulated) to reduce price. This benefit of reducing gold price pleases gov'ts because they can reduce the
appearance of inflation which allows demand to increase for more debt (treasury bills) as people seek the "safety" of these investments IMO.
A revelation: the biggest losses (on paper) for mortgage bonds have been in PRIME mortgages not subprime. to be clear (and fair )prime market are
much bigger (which makes the feat easier) , but also the media has focused almost exclusively on the "subprime" section to keep the image that this
"problem" is containted, it's NOT. they also omit the prime mortgage losses so that they can say, "suprime is overblown it is only X percent of
total market". So they are being deceptively accurate. that pat
IMO, If the European Central Bank is very stubborn w/ rate cuts it may force the fed's hand to stop cutting ( or risk losing world reserve currency
status by develuing currency vs. euro too much). . Perhaps the ECB would like to regain some of their power which was transferred to NY financial
centers from London two generations ago?
Their is much uncertainty to which paths' govt's will chose and the aggresion in which they do so (spending and handing out $), also to wether they
will rescue the bond monolines, the cental bank or "federal reserve is increasingly a mute point in this situation as paul volker (former fed
chair) said last week on cnbc " it is out of their control". this is suppose to appear in the NY times soon.
[edit on 26-1-2008 by cpdaman]