There will be a slow, grinding, downward adjustment of all dollar prices

The National Investor/The American Spectator ^ | 2001 | Jude Wanniski

[A. Pole]

In 1995, I predicted that inflation's days were numbered. A year later I warned of a new, more exotic enemy-deflation.

Throughout the boom and bust of the late 1990s and the new millennium, I detailed this foe's attacks as it stomped its way through Asia, Russia, Brazil and the U.S. farm and energy economies, and later as it crashed into Wall Street and Silicon Valley. Now it ravages global telecommunications companies and capsizes every Third World economy that counts its debt in dollars, from Argentina to Zimbabwe.

[AdamSelene235]

That wouldn't explain why the Dollar rallied against the Euro in 2001 and fell in 2003. Guess again.

That before the virtuous cycle began to reverse itself. Well known phenomenon. Currency debasement often results in good times and high profits (making the currency attractive) in the short term.

[Southack]

Currency debasement makes the currency appear attractive to "buy and hold" investors?!

Nope. I don't think so. Guess again.

[justshutupandtakeit]

I think devaluation is a deliberate policy. Greenspan knows very well that to collapse interest rates means the dollar tanks. Plus, it allows the costs of the Iraqi war to be passed along to the Europeans.

[AdamSelene235]

Currency debasement makes the currency appear attractive to "buy and hold" investors?!

Sure, in the short term. Just plot M3 next to the DOW and the NASDAQ. They all explode simulataneously back in 95-96.

Long term people wise up. There will be significant capital flight from US equities, bonds, and mortgage backed securities.

Getting back to our Fannie argument. Tell me, how can they operate with a flat yield curve?

[B-Chan]

And may the Lord richly bless you, too, Southack.

[Southack]

FNM can do just fine even if 30 yr rates equal 1 yr rates. So long as interest can be charged and is being paid back along with principal, FNM will continue to make money (even in spite of massive refinancing during the periods of interest rate declines).

In fact, FNM is capable of operating in an environment where short term rates are HIGHER than long term rates, as FNM can restructure the types of new mortgages that they issue, as well as obtain low-cost capital by issuing new stock, soliciting private investors, or even getting direct government loans. Not that it will necessarily happen, mind you.

[Southack]

That's fine, but your comment that the U.S. has no surplus manufacturing capability revealed that your educational level has absolutely no business discussing financial matters.

The truth shall set you free, so don't fear it.

[AdamSelene235]

FNM can do just fine even if 30 yr rates equal 1 yr rates. So long as interest can be charged and is being paid back along with principal, FNM will continue to make money (even in spite of massive refinancing during the periods of interest rate declines).

Why would you pay interest on helicopter money? Soon there will be no distinction between bonds and cash.

or even getting direct government loans. Not that it will necessarily happen, mind you.

What makes you think it hasn't already happened?

[JNB]

Its not useful debating him, all Southack does is repeat the Junk Limbaugh says about the economy, and noting beyond that. He does not even get the concept how commodities can inflate while financial assets can deflate at the same time.

[Southack]

Your unusual view that the Dollar can be manipulated in such a manner that goods such as cars cost more while simultaneously assets such as houses cost less is hardly going to win you any awards in common sense.

[JNB]

Again, you refuse dto read the posts I and others have put up explaing to you why financial deflation and commodity inflation is possible, yet you ignored those many posts. Again Southack, you really need to do some reading, again, think credit, how easy credit induces inflation of financial assets, and how a strong dollar encourages foreign holdings of US paper, and this drives rates down, take away the strong dollar, US paper becomes less attractive, rates rise, rates rise, credit becomes more difficult to come by. More difficult credit and higher intrest rates will lead to less demand for homes, reduciing their prices. This is what happened in many parts of the US 10 years ago, yet you ignore those facts.

Again Southack, read some books or at least some articles on economics, again, your listening to Limbaugh and repeating the clueless nonsense the Limbaugh spouts about economics will not win you any awards in common sense.

[Southack]

"a strong dollar encourages foreign holdings of US paper, and this drives rates down"

Don't look now, but we have a weak Dollar and yet rates have plunged down. Go figure. Hmmm, perhaps I'm not the one who needs to do some more explaining...

Also, I've seldom agreed with Limbaugh, and certainly don't listen to him on a regular basis. I was one of his harshest critics when I learned that he had claimed that hillary wouldn't dare run for the U.S. Senate in 2000. Ergo, you must have me confused with someone else.

[A. Pole]

I was one of his harshest critics when I learned that he had claimed that hillary wouldn't dare run for the U.S. Senate in 2000.

I heard him couple days ago anouncing that the recovery HAS STARTED! Is it a bad sign?

[Southack]

Even a stopped clock is right twice a day...

[JNB]

You seem to parrot what he says on the economy to a dot. Why have rates gone down, mainly because of emergency intervention by the FED buying US treasuries in a exercise called rate capping, and a massive spending spree by Bank of Japan in a desperate attempt to weaken the yen against the Dollar. As history has shown time and again, minipulations only work for so long before the dam bursts.

[Southack]

"a strong dollar encourages foreign holdings of US paper, and this drives rates down" - JNB

"Why have rates gone down, mainly because of emergency intervention by the FED buying US treasuries in a exercise called rate capping..." - JNB

Not only is it humorous to watch you contradict yourself, but also to see you take yourself so seriously while you are spinning this self-contradicting nonsense.

Gee, now tell me why rates have gone down again?!

< /MOCKING! >

[JNB]

You know, you are a clueless nitwit. You have no understand of economics what so ever. Are you so glued to being partisan that you refuse to see facts, in that case,m you are not better than DUer, or are you simpily dense? I said what is keeping bond rates low, I said it was a temporary intervention measure at best, but a weak dollar long term will cause rates to raise as foringers put their money elsewhere seeking better returns, I posted in my post that you mocked the words "EMERGENCY INTERVENTION" that should give you a clue that this is not normal economic activity. Here is a suggestion, read up on economics, read up on economic theory, if not, then it will be pointless to debate you. There is more to economics than supply side talking points FYI. Lastly southack, grow up.

[Willie Green]

Bravo! Well said!

[GOPJ]

bump

[Southack]

Yet, I'm not the one who's contradicting himself here, kid.

First, you claimed that the Dollar could be so magicially manipulated that the cost of goods like cars could go UP while simultaneously assets such as houses would go DOWN in price.

Next, you claimed two self-contradicting "reasons" for what would cause rates to go down.

Besides those inherent self-contradictions, you've erroneously claimed that I was a Rush Limbaugh devotee.

In short, every point that you've tried to make has either contradicted one of your earlier claims or been completely wrong to begin with.

The fact of the matter is that you've laughably managed to convince yourself that a few snippets of pit wisdom are somehow equal to a grand understanding of global economics.

Thus, you may be able to pat yourself on the back as if you actually know why things happened the way they did in the past, but you will fail miserably to accurately predict where and when interest rates, exchange rates, and global prosperity trends will shift and in what direction.

In contrast, I've been posting for months that rates would come down while the Dollar would get weaker on the foreign exchanges even while *deflation* raged as the greater probability than inflation. Moreover, I've posted *why* these things would happen.

And if oil makes a sharp decline over the next 3 to 6 months, I will have yet another public prediction to crow about (and it will and I will).

Now, you are welcome to make your own public predictions to see how you fare against me (and it won't be pretty).

So go ahead big guy. Post those witty predictions and let's re-visit this thread in 3 to 6 months.

Come on, surely you aren't frightened away from such a challenge?!

Go ahead! Post some predictions! Let's see if they are as funny as your ad hominems.

(or perhaps we'll just see you post a few more insults and then run away)