Posted on 09/13/2009 11:31:20 PM PDT by rabscuttle385
After years of selling cheap goods to debt-fuelled Western consumers, China now has $2 trillion dollars of foreign exchange reserves. That's 2,000 billion – a reserve haul no less 25 times bigger than that of the UK.
BY LIAM HALLIGAN
(snip)
The entire non-Western world rightly sees serious inflationary pressures down the track in the US, UK and other nations where political cowardice has resulted in irresponsible money printing.
(snip)
...to send the dollar into freefall. US inflation would then soar and interest rates would have to be jacked up. Even if a fast-collapsing dollar is avoided, Fed rates may have to rise quickly if China is serious about dollar-divesting and the US has to sell its debt elsewhere. Under both scenarios, the world's largest economy could get caught in the stagflation trap – recession and high inflation.
Beijing doesn't want the US to stagnate. China has too much to lose. But even if China and US work together to avoid a meltdown, the currency markets could provide one anyway.
The dollar is now being used as a "carry" currency. Traders are using low Fed rates to take out cheap dollar loans, then converting the money into currencies generating higher yields.
"Carrying" credit in this way is currently the source of huge gains. No one knows the true scale, but the world has, of course, been flooded with cheap dollars.
This presents serious systemic danger.
(snip)
This is what happened in 1998, when yen carry-trades went wrong, causing the collapse of Long-Term Capital Management and sparking a global slowdown.
So even if the Western world manages to fix its banking system, the Fed's money printing could well be stoking up the next financial crisis. The dollar carry-trade. You heard it here first.
(snip)
(Excerpt) Read more at telegraph.co.uk ...
Stagflation.
Not since the Carter administration...
At the rate things are going, it looks like Carter may have been a piker compared to Obama.
No, no, the disaster has been avoided and the economy is in full bloom. Recovery is right around the corner.
Doesn’t anyone listen to what President Ohstupid and his media minions say?
Yeah. Carter’s gotta be the happiest person on earth.
He isn’t the worst president ever anymore...
Keep sending idoits to D.C. and this is what you get. LBJ, Nixon, Carter, Clinton, Bush and now Obama is no way to run a country.
The Second Great Depression is coming......
Like heck we did. YOU heard it at free Republic first. We've been warning people for months.
Right I forgot about that. Silly me for looking at silly numbers, national debt, out of control government spending, plumeting GNP, and a sinking dollar. Everything will be ok because Obama said so.
You are already in it. It just takes a little while for the river to dry up after the source feeding it is cut off.
People haven't realized yet that the price of gold isn't going up, it's the value of our dollar that is going down. That holds true for all commodity markets. It isn't a commodity market recovery, our dollar is buying less.
Maybe government owned "US" businesses, But Obama can't sell private businesses- yet. Except for GM and Chrysler.
He saw a vision of himself descending from one circle of the inferno to the next, from a darkness full of wind and hail to an abyss of stinking mud. - The Gioconda Smile by Aldous Huxley
Just a little something to cheer everybody up.
The way I look at it is you have three commodity choices and all are doing fairly well - rose colored glasses, Reynolds wrap, Or MREs s/
Inflate or Die.
Question for the economics gurus out there.
What does stagflation mean for the average household out there? Price of everything goes up? Do wages follow or do they stay flat? (for those lucky enough to still have jobs I guess).
Better to use cash now to pay off (mortgage) debt as furiously as possible, or hang on to money in the hopes that interest rates spike and we can earn 10% on it while servicing 6%-7% debt?
I think I’ll go for the MRE’s...can’t eat paper money and metal gold!
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