To the OP, thank you for appreciating my first response. To others who think my summarization of the state of events actually evidences what will contribute to our downfall, I fail to follow that logic but am open to further discussion.
In terms of inflation. Yes, it is coming. China will raise their wages and standard of living. That will cool their GDP and cause price increases here of all imported items. And this before a change in the exchange of the two currencies. And that exchange will also be fluctuating. But, inflation is not all bad. Especially for debtors and debtor nations.
The monthly price of mortgages will not change for those who already have them. But, inflation and a devalued dollar will eventually lead to wage increases. Now the 1900 a month you are paying for your metro area 3 bedroom, bath a a half (locked in at a mid five interest rate to reflect average metro price and interest on decent credit during the mid point of the boom and price spike of the real estate bubble), will only be 20 percent of your monthly rather than say 32 percent. The 12 percent savings will go to pay for the higher price of gas and goods. So, homeowners largely break even.
Unless the homeowner was on the brink of default. If they were on the brink of default inflation would restore their recently devalued property value. This gives them the motivation to continue to pay. The 12 percent wiggle room from their new inflation adjusted salary allows them to pay. Sure, they are still tight on other things that they want to buy, but they stop defaulting. They stop the foreclosures and the downward spiral of house values.
As imported items continue to rise in price there comes a point where the comparative labor advantage of "underpaid" developing countries personel becomes a wash and business starts to move back home. U.S. technology exports are up several percentage points since the start of 2011. Other industries will follow.
If inflation can put the brakes on the housing crisis AND pull jobs back to the states. Well, then yes. Of course they are doing it on purpose. And they should. But, it is a fine line and there are absolutely people who will not come out ahead on all of this. But the government, and the Middle Class will both benefit. The rich will lose nothing. So, it's full steam ahead.
They just have to not let it spiral out of control too quickly.
edit on 8-5-2011 by watcher3339 because: wrote imports and meant
exports
