[quote=4plexowner]
In order to buy our bonds, the Chinese would print up yuan on their printer – this caused inflation IN CHINA because the only new currency created in this scenario was yuan (ie, we exported our inflation to China)
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4plexowner, I don’t think China has to print any yuan. They just use our dollars from the trade deficit to buy those bonds or come over here and buy US property. Japan did the same thing in the ’70’s & ’80’s before their collapse.
As I see it, the FED is trying to pump enough money in to the system to make up for all the mortgages, stock market, and derivatives loses. I don’t think they will know when to or even can stop at the right time and will over shoot the mark.
The difference is between credit inflation and money inflation. All past US bank panic’s before and after the FED have been started due to credit inflation (also read ‘over speculation’) in land, stock market, or some other commodity. Banks or the US Govt over-leveraged the system with easy credit. It spilled over into the general economy.
When that speculation cycle ended, the economy collapsed as well.
The problem is most don’t think you can have too much of a good thing (gluttony). Over-speculation is the cause of a later collapse. The bigger the speculation, the bigger the collapse. We need to devise a system to identify and control over-speculation.
