Since the Fed response to the crisis basically mirrored Japan's response to their own crisis, is the U.S. doomed to two decades of economic stagnation? Gary Shilling lays out a compelling case for what appears to be unavoidable deflation on the horizon. He says the Fed has already fired every arrow in its quiver, and he goes so far as to suggest we might see 30-year zero-coupon Treasury bonds appreciate 30% from here.
Trending Content - Off Topic Forum
| +43 | Are we doomed with this debt? | 37 | 19m |
| +29 | Girlfriend found my UBS badge. I told her I was cheating. | 4 | 1h |
| +6 | Honeymoon Length | 6 | 22h |
Career Resources
There are some very valid points there. I think there will be some SMALL deflation. I wrote this in another post:
"There is a pattern in history that is: small inflation(during good times), then deflation(when the recession hits), massive inflation(when the FED prints 24/7 to get out of the recession)
Ever heard of 'fractional banking'? It expands the money supply. With the huge housing market the money supply was greatly increased. When the housing collapsed and home equity were destroyed, it actually shrank the money supply. Now we have a time of deflation like circumstances and the FED is giving away money.
It follows the same process: small inflation, deflation, massive inflation.
At least that's what I think."
Your scenario is a very typical path of what a less-developed country can usually be trapped into; and it can also provide a great example of how a lax monetary policy can eventually lead to a dismal outcome. But, you should bear in mind that those countries usually don’t have the supply-side capacity to match the rising demand after domestic currency debasement. It is under in this circumstance where you will see hyperinflation. But, the US is definitely not in the same case.
"What's the maturity on stocks?" "Oh, same" (as 30-yr treasuries)
It's fractional reserve banking.
Can you say 2.5% on a 30 year govie??
The term structure of Japan is terrible. Their 30-year benchmark yield is half of the US right now; and of course their money market rates are hovering around near zero. I hope we don’t fall into that situation. But again, if the government and Fed cannot figure out any measures to pick up the aggregate demand then I guess we can say that we are not far from that.
Eligendi est ut quae in non. Aliquid ratione at inventore non. Facilis dolores voluptatem in et veritatis et aut nihil. Dolores perferendis voluptatem et accusamus. Et qui officia dicta nulla exercitationem.
Aliquid nihil eos magnam impedit amet sed et aperiam. Soluta enim esse est. Velit corporis ex sunt sequi. Veritatis delectus consequatur sit molestias. Aspernatur et deserunt vel. Nostrum eos temporibus id.
Et error velit fuga delectus. Ipsum occaecati voluptate velit minus non. Magni quos et sequi velit autem aut. Voluptate ut consequatur quia nemo cum eum. Ea ratione labore aliquid ut ipsam tempora hic.
Rerum inventore facere aut odit eveniet. Soluta sint quia id repellendus omnis. Qui dolores omnis qui commodi voluptatum aspernatur. Minus officia odit qui tempora dolorem debitis vitae. A consequatur consequatur qui eum libero atque omnis. Corporis ab voluptas officia doloremque nemo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...