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The Forum > Article Comments > Picking up pennies in front of steamrollers > Comments

Picking up pennies in front of steamrollers : Comments

By Murray Dawes, published 18/10/2010

The huge moves in the market at the moment are sending a big warning signal to those who are willing to listen.

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I find it very interesting that I seem to be the first to comment here so late in the day. I think it is a reflection of the way so many people don't seem to be aware, or don't want to be aware of the financial problems that await us.

The article is a good commentary on the tsunami that we can look forward to, because people won't accept the inevitable adjustments to their life. We will probably have a great deal of social unrest and everyone will probably blame someone else for the predicament, not realising that everyone is to blame for expecting this constant borrowing from the future has consequences. One cannot live on debt forever and the likes of Greenspan and Benanke have a lot to answer for. However they are not the only ones, just the most visible.

How does the individual protect themselves? Perhaps buy the insurance of physical bullion, particularly silver.
Posted by snake, Monday, 18 October 2010 5:03:48 PM
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Snake

Iím afraid my day job sometimes stops me responding as soon as Iíd like.

I think we may be seeing the end stage of the world's BIGGEST EVER GAME OF CHICKEN. This may be the Fed telling the Chinese that they can print dollars faster than the Chinese can buy them up.

By rights the US dollar should have been depreciating against all major currencies. It hasnít happened because the Chinese have tied the Remnimbi to the dollar keeping it (the dollar) artificially high. The Chinese do this by buying up dollar denominated assets such as treasury bonds.

The Chinese are not doing this in order to help the US. They are doing it to keep their currency, the remnimbi, artificially low and so give their businesses a competitive edge. This disadvantages the US and other countries such Japan.

I think the Obama administration has quietly decided this must end.

There is also another factor. The US is effectively bankrupt. When private individuals or companies go bankrupt they come to an arrangement with their creditors. The bankrupt may be able to pay, say, 50 cents in the dollar.

Bankruptcy is important because it allows people to settle matters and move on.

When a country like the US goes bankrupt it settles with its creditors through inflation. It pays 100 cents in the dollar but the recipient will only be able to buy 50 cents worth of goods and services. A bout of inflation may hurt Americans but it may also be the LEAST PAINFUL way the US is able to dig itself out of the hole it is in. Not pain free, but least painful.

When all options are bad what Bernanke is doing may be the least worst option.

None of this should surprise anybody. I have read much of what Bernanke wrote before he became Fed chairman and I can sum up his philosophy in two sentences:

Inflation is bad

Deflation is worse
Posted by stevenlmeyer, Monday, 18 October 2010 6:20:09 PM
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after the stock market crash world trade was exposed to trade war this led to the depression , we think we dodged the bullet this time round by not embarking on tariffs, but the depreciation wars amount to the same things plus it adds in deflation. so much for the wise men of independant reserve banks,
Posted by slasher, Monday, 18 October 2010 8:36:53 PM
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