On Inflation, Deflation & The Fed 08-17-09 mpg China is Again Buying Long-Term U.S. Treasuries . . . Does That Mean China is Betting on Deflation? Deflation Alert - A quote...."For the first time since the financial crisis started, China is again ramping up purchases of long-term U.S. treasury bonds. Indeed, according to Bloomberg:" -- This makes sense ONLY if China believes the US-NRE will not monetize the debt or default on its obligations. This could be a very bad call and a severely misplaced sense of faith on their part, just think of the Japanese and what happened to them in the US-NRE's real estate market during the 80's. – mpg -- For more on this issue see....The Green Light - 01-16-08 - mpg Let Them Inflate - It's coming, but it'll take time. - mpg Related Article - A quote...."I think that Paul Krugman is one of those absurd guys that has no idea what in the hell he is talking about and who owes his undeserved prominence to being a real butt-kissing sucker-upper to Alan Greenspan and his Federal Reserve, and now he’s doing the same thing to the laughable Ben Bernanke and his disastrous Federal Reserve, although I will admit that I don’t know why anybody listens to this guy." Regarding the two articles shown above see the following quote from Some Tentative Laws..... Third
law of wartime currency
expansion *
1) The interest rate (eventually) is inversely related to the amount of war time debt. 2) The interest rate (eventually) is directly related to the amount of war time currency expansion. Bernanke & Co. have generated enormous amounts of "temporary" debt by creating over twenty four trillion dollars worth of loans, back stops and guarantees to support "asset valuations" (rich people's paper products). These programs were implemented solely to support and conceal trillions of dollars worth of bad debts (toxic assets). As it stands now, we're still at the third law's rule number one regarding interest rates, as long as all that debt out there is still unwound (which will be difficult, if not impossible to do, because it's still increasing and we probably will soon enter into a Great Depression) interest rates will remain at zero and deflation will hold sway. As soon as the debts and toxic assets are canceled or marked to market, (not likely for years, if not more than a decade) all those Fed "guarantees" will suddenly become monetized (not paid back), the third law's rule number two comes into play and the Fed will have to jack rates into the stratosphere to combat hyper-inflation. Of course we could have stagflation (the asterisk*) however if that occurs, with the horrendous amounts of paper products already floating around out there, we'd all be looking at a replay of Germany's Weimar Republic. – mpg See also....Long Term Joblessness Chart & The Ten Year Cycle |