Mr.Mortgage predicts two bottoms…

[Bob]

[quote=5yearwaiter] There could be sure some housing prices chances to go down – however … with the devaulation again no value to the money situation would keep housing rates at the same level or not much lower…… [/quote]

Excellent point, and that could be the plan of last resort by the Feds. Using inflationary forces to prop up prices with the “appearance” of price stability in the housing sector.

[sd_matt]

Amateur for-fun question

If the $ value goes kaput then would a transition back into a production economy be expedited in the long run? Ya know…our exports being cheaper.

If so, then is Obama/Fed helping us in a back-handed way?

[sd_matt]

Amateur for-fun question

If the $ value goes kaput then would a transition back into a production economy be expedited in the long run? Ya know…our exports being cheaper.

If so, then is Obama/Fed helping us in a back-handed way?

[sd_matt]

Amateur for-fun question

If the $ value goes kaput then would a transition back into a production economy be expedited in the long run? Ya know…our exports being cheaper.

If so, then is Obama/Fed helping us in a back-handed way?

[sd_matt]

Amateur for-fun question

If the $ value goes kaput then would a transition back into a production economy be expedited in the long run? Ya know…our exports being cheaper.

If so, then is Obama/Fed helping us in a back-handed way?

[sd_matt]

Amateur for-fun question

If the $ value goes kaput then would a transition back into a production economy be expedited in the long run? Ya know…our exports being cheaper.

If so, then is Obama/Fed helping us in a back-handed way?

[patientrenter]

Bob and Arraya,

I am still puzzled why you think inflation cannot be achieved.

If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.

Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.

Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.

That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.

What am I missing?

[patientrenter]

Bob and Arraya,

I am still puzzled why you think inflation cannot be achieved.

If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.

Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.

Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.

That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.

What am I missing?

[patientrenter]

Bob and Arraya,

I am still puzzled why you think inflation cannot be achieved.

If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.

Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.

Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.

That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.

What am I missing?

[patientrenter]

Bob and Arraya,

I am still puzzled why you think inflation cannot be achieved.

If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.

Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.

Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.

That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.

What am I missing?

[patientrenter]

Bob and Arraya,

I am still puzzled why you think inflation cannot be achieved.

If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.

Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.

Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.

That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.

What am I missing?

[peterb]

I doubt very much that China, the PRC, wants a currency stronger than the US$. They’re in a very big pickle. They’ve gone to extreme leverage for productive growth and no one is now buying what they produce. A stronger yuan would only increase their problems. This is trouble in a very big way for them. What are they now going to do with all these people that worked in factories? Back to the farm? Maybe, if they want to keep eating.

[peterb]

I doubt very much that China, the PRC, wants a currency stronger than the US$. They’re in a very big pickle. They’ve gone to extreme leverage for productive growth and no one is now buying what they produce. A stronger yuan would only increase their problems. This is trouble in a very big way for them. What are they now going to do with all these people that worked in factories? Back to the farm? Maybe, if they want to keep eating.

[peterb]

I doubt very much that China, the PRC, wants a currency stronger than the US$. They’re in a very big pickle. They’ve gone to extreme leverage for productive growth and no one is now buying what they produce. A stronger yuan would only increase their problems. This is trouble in a very big way for them. What are they now going to do with all these people that worked in factories? Back to the farm? Maybe, if they want to keep eating.

[peterb]

I doubt very much that China, the PRC, wants a currency stronger than the US$. They’re in a very big pickle. They’ve gone to extreme leverage for productive growth and no one is now buying what they produce. A stronger yuan would only increase their problems. This is trouble in a very big way for them. What are they now going to do with all these people that worked in factories? Back to the farm? Maybe, if they want to keep eating.

[Author]

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