Seattle Bubble Forum Archive

by **perplexd** » Sat Jun 23, 2007 9:06 am

Ultimately, we still need to buy oil, though, and people will stop selling it to us if our currency is obviously worthless. Chinese and Indian demand for energy is growing like 6% a year and they can actually pay for it with real goods and services.

So, keeping the confidence game (a.k.a. world reserve currency status) going is way more important than shrinking the debt. It is a rock-and-a-hard-place situation for the Fed where they can't afford to kill the economy, but making our customary imports of everything (but especially oil) impossibly expensive kills the economy anyway.

This is why they will avoid lowering or raising for as long as possible: they don't want to incite the avalanche on either side of the narrow valley they are walking through.

by **mike2** » Sun Jun 24, 2007 2:18 pm

by **perplexd** » Sun Jun 24, 2007 5:33 pm

I used to make a very similar argument, but the answer "somebody probably lost money" isn't really satisfactory. Who lost money and was the money just moved around or actually pulled out of the economy? If it wasn't removed from the economy, then I'd say this was a wholly inflationary episode.

Now, it seems to me that the only way it is removed from the economy is if it was somehow the BANK who lost the money [and the Fed doesn't bail them out]. Someone defaults and the money is just gone, period. Then the new money created for other new loans is countered by the money destroyed by the action of the bank just writing a $300,000 loan right off their books.

Is that what they do? I honestly don't know. Somehow I doubt this is that kind of a zero-sum game for the banking industry. It would be like having a casino shut down in vegas because people happened to start beating the odds for a couple weeks, and what's an honest casino operator to do against fate? Well, we know what the casino operator does, but somehow we don't like to think bankers do, effectively, the same things with their 'odds'.

by **rose-colored-coolaid** » Sun Jun 24, 2007 6:35 pm

by **mike2** » Sun Jun 24, 2007 10:28 pm

by **perplexd** » Sun Jun 24, 2007 11:17 pm

by **deejayoh** » Mon Jun 25, 2007 7:14 am

by **mike2** » Mon Jun 25, 2007 9:06 am

by **sniglet** » Mon Jun 25, 2007 12:36 pm

by **deejayoh** » Mon Jun 25, 2007 1:00 pm

by **sniglet** » Mon Jun 25, 2007 3:00 pm

by **mike2** » Mon Jun 25, 2007 3:53 pm

by **sniglet** » Mon Jun 25, 2007 3:59 pm

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