I still think there will be inflation. Not only inflation but an inflationary boom with Obama. It’s just that we are at the fallout, right before the new expansion and selloff in worthless treasuries. If I am right, emerging markets will grow debt like crazy. I have noticed every wild boom have occurred when the growth rates have been around 4 % in developed countries, like the 80-90 boom. This 4 % level is projected for the emerging economies next year, so if inflation follows the trend down in countries like brazil and the like, it means interest rates will come down from a 12 % level in brazil, to levels that are going to cause huge credit growth and a booming economy. The bank UBB is now worth around 400 billion, it’s a very large number, the bank holds around 20 % of
local debt in brazil, but I think it’s going to grow.

If the US is bankrupt, how can there be deflation?

http://www.freerepublic.com/focus/f-news/1053684/posts

This article by Warren Buffet pretty much explains the fundamentals.

But this is silly, the bank is not going to lend me money for no reason. But they will lend me an excessive amount for a real estate purchase which means I give someone an extra $100,000 they spend it and have a good time making the economy look good for a while.

Unfortunately in both scenarios I end up with an excessive debt so I don’t spend as much in the future and everyone else eventually stops borrowing so there is less spending and we have a recession.

You are assuming that a change to the system will result in a better system. Don’t be so sure.

In a democratic western world. Politicians make decisions that the populace want so that those politicians can get re-elected.

By the time the populace realises they want/need something it is way too late.

Have you noticed that policy in the US is trailing the carnage not leading it? Have you also noticed that Oz is copying the US only on delay? EG, The US Cut rates dramatically at the start of the year. We have cut dramatically now. The US pumped a fiscal stimulous package of $180 Billion (via a cash payment to individuals) in May and June. Our government is now paying out $10 Billion.

Our Government has even loaned money into the car industry to prop up floor financiers and car financiers.

As risk aversion increases our Government will also start rescuing companies that are deemed “too important to fall”. It’s all bull!!!!!

Your site seems to have been subjected to a nasty script injection called “yahoo-coutner” which is occasionally successfully loading internet nasties on to my computer when I view your blog. Search any of your page’s source for “Yahoo! Counter starts” to see what I’m talking about. Guessing it is a wordpress vulnerability, but not sure.

Regards

Rhys

Big media news will be made of blips up in any sentiment readings. Besides, something had to come soon after Business leaders and economists so dramatically forecasted recession next year in yesterday’s report.

As an aside though, I’m googling regularly for articles on property prices to trawl up what is reaching print. SE Qld property is taking a very large hit now. So I for one am certain Steve’s take on the future of property prices is coming to pass.

The share market has been pretty much range bound since October. That type of market can signal to many people that a floor has been put under price. They then jump in. The market is cruel. In a bear market once the market has corrected from its falls long enough to suck the remaining optimists in it finds a new low.

The Markets will probably find a new low in the next month or less. After that low we should see a better correction. That is, a more upward correction, less sideways. That will signal to many that “the worst is over”. Once that correction has run its course the bear market will continue. 2008 and 2009 may go down in history as the worst period on record for stocks .

It all comes back to sentiment. Positive sentiment drove the biggest debt and asset bubble in history and now negative sentiment will drive the worst share market falls in history. The caveat is that this may take longer to play out than I expect. The falls and the “wake up” has occurred much slower than I expected.

In terms of the Australian Banks. They are smart to raise capital now. The whole world has turned risk averse. Even the Oz banks. If the debt unwind gets really bad, like I expect. The banks will need every cent of capital to survive. Only the strong survive. Most lenders in Australia have already dropped out of the race. There is only a handful left. Will be interesting to see who the survivors are and who the government bails out.