Deflation is winning

[underdose]

I don’t have the attention span to read every post on this thread, so I apologize if I address something someone else already did.

Yes, deflation is winning the day. The day. But the month, the year? Back in 2005, housing was winning the day. Better analogy, back in early 2000, tech stocks were winning the day. Could home prices go to infinity? No. Could tech stock prices go to infinity? No. The home price bear has been slow because housing is an inefficient market. But the Nasdaq bear went out the window pretty quickly. And currency is a pretty efficient market too. The bear can go out the window any day, and in a hurry.

The US has a debt that is the mother of all neg-am loans. Everyday its growth accelerates at an unprecedented pace. All of that treasury debt is as good as printed greenbacks, and is rapidly replacing loans that would otherwise be written off as the bailouts grow in scope. Our trade deficit remains at a $700 billion annual pace. Our current accounts balance (accumulated trace deficit) is in the trillions and continues to grow. I pose the same question to this as I did to housing and tech stocks: Can it go to infinity? Of course not.

Why is the dollar strengthening against other currencies, gold and commodities? Why was housing strengthening against the dollar a few years ago? Irrational exuberance!! Flight to “quality” is winning the day, but what happens on the day that people realize that the dollar has as much quality as housing and tech stocks did? Where do you want to be on that day?

As for me, I take deflation with a huge grain of salt. It may persist for a while, just as the housing bubble did. But I’m in the “tsunami” camp. I do not want to be standing on the beach when the water comes rushing back. I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.

All that said, one caveat I must admit. I saw the housing bubble for what it was in 2002, and the tech stock bubble in about 97 or 98. I’m often wa-a-a-ay early on these things. But I’d rather be early than late…..

[kewp]

[quote=underdose]I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.
[/quote]

I used to make that argument as well, until I realized that amounted to about $500 billion dollars total.

Not chump change by any means, but not what I would call a money Tsunami.

[kewp]

[quote=underdose]I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.
[/quote]

I used to make that argument as well, until I realized that amounted to about $500 billion dollars total.

Not chump change by any means, but not what I would call a money Tsunami.

[kewp]

[quote=underdose]I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.
[/quote]

I used to make that argument as well, until I realized that amounted to about $500 billion dollars total.

Not chump change by any means, but not what I would call a money Tsunami.

[kewp]

[quote=underdose]I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.
[/quote]

I used to make that argument as well, until I realized that amounted to about $500 billion dollars total.

Not chump change by any means, but not what I would call a money Tsunami.

[kewp]

[quote=underdose]I’ve read that over 90% of all dollars are outside of the US borders. If all those come rushing back to our shores, the dollar destruction currently occurring from debt writedowns will not keep pace.
[/quote]

I used to make that argument as well, until I realized that amounted to about $500 billion dollars total.

Not chump change by any means, but not what I would call a money Tsunami.

[kewp]

[quote=barnaby33]
I didn’t think it through enough because my main point was really about the weird strengthening of the US dollar which is perverse considering how our economy is behaving.[/quote]

More and more I’m beginning to think Peter Schiff had it all backwards.

The ‘bubble’ was in oil, gold, emerging markets and foreign currencies. America had the strongest fundamentals all along; it was the rest of the world that was full of hot air.

Edit: Holy crud, I just realized our trade deficit about equals the amount of hard currency we export. I guess paper dollars are our #1 export!

As long as they stay strong we should do just fine.

[kewp]

[quote=barnaby33]
I didn’t think it through enough because my main point was really about the weird strengthening of the US dollar which is perverse considering how our economy is behaving.[/quote]

More and more I’m beginning to think Peter Schiff had it all backwards.

The ‘bubble’ was in oil, gold, emerging markets and foreign currencies. America had the strongest fundamentals all along; it was the rest of the world that was full of hot air.

Edit: Holy crud, I just realized our trade deficit about equals the amount of hard currency we export. I guess paper dollars are our #1 export!

As long as they stay strong we should do just fine.

[kewp]

[quote=barnaby33]
I didn’t think it through enough because my main point was really about the weird strengthening of the US dollar which is perverse considering how our economy is behaving.[/quote]

More and more I’m beginning to think Peter Schiff had it all backwards.

The ‘bubble’ was in oil, gold, emerging markets and foreign currencies. America had the strongest fundamentals all along; it was the rest of the world that was full of hot air.

Edit: Holy crud, I just realized our trade deficit about equals the amount of hard currency we export. I guess paper dollars are our #1 export!

As long as they stay strong we should do just fine.

[kewp]

[quote=barnaby33]
I didn’t think it through enough because my main point was really about the weird strengthening of the US dollar which is perverse considering how our economy is behaving.[/quote]

More and more I’m beginning to think Peter Schiff had it all backwards.

The ‘bubble’ was in oil, gold, emerging markets and foreign currencies. America had the strongest fundamentals all along; it was the rest of the world that was full of hot air.

Edit: Holy crud, I just realized our trade deficit about equals the amount of hard currency we export. I guess paper dollars are our #1 export!

As long as they stay strong we should do just fine.

[kewp]

[quote=barnaby33]
I didn’t think it through enough because my main point was really about the weird strengthening of the US dollar which is perverse considering how our economy is behaving.[/quote]

More and more I’m beginning to think Peter Schiff had it all backwards.

The ‘bubble’ was in oil, gold, emerging markets and foreign currencies. America had the strongest fundamentals all along; it was the rest of the world that was full of hot air.

Edit: Holy crud, I just realized our trade deficit about equals the amount of hard currency we export. I guess paper dollars are our #1 export!

As long as they stay strong we should do just fine.

[underdose]

kewp, what amounts to $500 billion? The total of writedowns, or the potential amount of tsunami flood back? I’m not sure what you mean, or where you are getting that figure from.

I disagree with your assessment that Peter Schiff had it backwards. Do you also think that Rich has it backwards? Both Rich Toscano (our host here) and Schiff are saying similar things. I read both of them because they back up my intuitions with hard data that I don’t feel like digging up myself. A lot of people, mostly fully discredited pundits on CNBC and the like, have been calling Peter Schiff “Dr. Doom” and dismissing what he has to say. He has a better track record to date than almost anyone. About the only people up there with him in terms of track record are Jim Rogers and George Soros, also saying dollar debasement will win. Incidentally, Soros has a few billion to his name to prove that he is almost always right.

Have you read Bernanke’s 2002 speech? It’s inspiring. He has the will, and the means, to cause severe inflation. Any indications of momentary deflation will likely only make him more aggressive, and that much more likely to overshoot and print too much. Most really smart people consider this the greatest threat we face.

[underdose]

kewp, what amounts to $500 billion? The total of writedowns, or the potential amount of tsunami flood back? I’m not sure what you mean, or where you are getting that figure from.

I disagree with your assessment that Peter Schiff had it backwards. Do you also think that Rich has it backwards? Both Rich Toscano (our host here) and Schiff are saying similar things. I read both of them because they back up my intuitions with hard data that I don’t feel like digging up myself. A lot of people, mostly fully discredited pundits on CNBC and the like, have been calling Peter Schiff “Dr. Doom” and dismissing what he has to say. He has a better track record to date than almost anyone. About the only people up there with him in terms of track record are Jim Rogers and George Soros, also saying dollar debasement will win. Incidentally, Soros has a few billion to his name to prove that he is almost always right.

Have you read Bernanke’s 2002 speech? It’s inspiring. He has the will, and the means, to cause severe inflation. Any indications of momentary deflation will likely only make him more aggressive, and that much more likely to overshoot and print too much. Most really smart people consider this the greatest threat we face.

[underdose]

kewp, what amounts to $500 billion? The total of writedowns, or the potential amount of tsunami flood back? I’m not sure what you mean, or where you are getting that figure from.

I disagree with your assessment that Peter Schiff had it backwards. Do you also think that Rich has it backwards? Both Rich Toscano (our host here) and Schiff are saying similar things. I read both of them because they back up my intuitions with hard data that I don’t feel like digging up myself. A lot of people, mostly fully discredited pundits on CNBC and the like, have been calling Peter Schiff “Dr. Doom” and dismissing what he has to say. He has a better track record to date than almost anyone. About the only people up there with him in terms of track record are Jim Rogers and George Soros, also saying dollar debasement will win. Incidentally, Soros has a few billion to his name to prove that he is almost always right.

Have you read Bernanke’s 2002 speech? It’s inspiring. He has the will, and the means, to cause severe inflation. Any indications of momentary deflation will likely only make him more aggressive, and that much more likely to overshoot and print too much. Most really smart people consider this the greatest threat we face.

[underdose]

kewp, what amounts to $500 billion? The total of writedowns, or the potential amount of tsunami flood back? I’m not sure what you mean, or where you are getting that figure from.

I disagree with your assessment that Peter Schiff had it backwards. Do you also think that Rich has it backwards? Both Rich Toscano (our host here) and Schiff are saying similar things. I read both of them because they back up my intuitions with hard data that I don’t feel like digging up myself. A lot of people, mostly fully discredited pundits on CNBC and the like, have been calling Peter Schiff “Dr. Doom” and dismissing what he has to say. He has a better track record to date than almost anyone. About the only people up there with him in terms of track record are Jim Rogers and George Soros, also saying dollar debasement will win. Incidentally, Soros has a few billion to his name to prove that he is almost always right.

Have you read Bernanke’s 2002 speech? It’s inspiring. He has the will, and the means, to cause severe inflation. Any indications of momentary deflation will likely only make him more aggressive, and that much more likely to overshoot and print too much. Most really smart people consider this the greatest threat we face.

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