marlon menezes wrote:
> I think yesterday's actions by the Fed to "buy" 1.2 Trillion dollars worth of
> various
> kinds of debt may be a turning point for inflation and the value of the
> dollar.
Marlon,
This is only the beginning.
The US dollar is going to behave just like a tomato.
The more that are available, the less value they will command.
> In the short run, we may see a boost to the economy and a reduction in
> interest rates.
> Long term, I think we could see dramatic rises in inflation rates, interest
> rates and
> decreases in the value of the dollar. Of course, other countries could follow
> the US in
> the race to the bottom in devaluing their currencies. In that case,
> investment in hard
> commodities and inflation protected bonds (TIPS and Ibonds in the US) will
> make a
> lot of sense.
You are almost guaranteed that every country that trades with the US will
depreciate
its currency in tandem with the US. Either that or it commits economic hara
kiri.
As far as TIPS and Ibonds are concerned, you are on the right track. The
problems
with these products in the US are:
a) Ten year TIPS currently have an annual yield of 1.30%
b) The Fed is actively buying TIPS, trying to 'control' yields.
Lastly, since we seem to be losing sight of the original question (in the
heading of
this post) my gut feeling is that the US problems will only be solved when
the job
is outsourced to India. That is when you will here that the answer to the US
problems is:
1) Re-instate financial rules that were in place since the great depression and
removed by George Bush (43) & Co.
2) Introduce legislation that makes it impossible for the US govt to print
money to
buy money.
Until then, everyone who is holding their savings in currency notes, had better
know
what they need to do to retain the value of their savings.
Mervyn1650Lobo
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