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To: Helotes

Is your thinking all price increases are related to the dollar devaluation because of the FED printing money?


5 posted on 10/19/2011 3:25:12 PM PDT by no-to-illegals (Please God, Protect and Bless Our Men and Women in Uniform with Victory. Amen. --> AmeriCain)
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To: no-to-illegals
“Is your thinking all price increases are related to the dollar devaluation because of the FED printing money?”

No, I am thinking that the banks are struggling to avoid a deflationary spiral and that the inflation, bogey man, story is a canard to misdirect the public.

The money supply has increased greatly thru direct Fed purchases of Treasuries, it's true, but because the velocity of money, (think of it as the rate of transactions) has been
so low the price level is set to fall sharply, ie deflation.

In this scenario, prices fall and therefore asset values fall and banks, whose collateral for their loans is dependant on the dollar value of the security get killed.

What needs to happen and what is going to happen is the value of everything needs to naturally go down and non stimulated supply and demand set the prices at that reduced level.

So far Goldman Sachs/Warren Buffet and others have acted to artificially support the price level, postponing the losses of the biggest banks and governments through their influence but the rate of transactions is a testament to the rejection of that price level by the market.

I don't know when but we are due for a cataclysmic correction ala Texas in the ‘80s

9 posted on 10/19/2011 5:24:13 PM PDT by Helotes
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