Zen: Dollar will appreciate after the 2008 election
I'm changing my thinking on this. I thought we were headed for hyperinflation as well, but I've since reconsidered.
I think we're going to see inflation, but only after severe deflation. IMO, we're headed towards a severe deflationary spiral.
Why? Credit demand is coming to a halt. No demand for credit, no demand for currency.
Treasury can't just issue currency. They have to sell bonds. No one is buying our bonds anymore. Thus demand for our currency is falling.
Precious metals are going to get crushed in a deflationary situation. Gold is going to get crushed.
The USD bullish position is cash, and US treasuries.
I sold all my gold and silver positions last week, and I dumped all my UDN (dollar short ETF).
ETrade opened the gates of hell today by marking $2.5BB of HELOC paper to .33 on the dollar. Almost a 70% loss. There is 6.5 Trillion worth of HELOC paper out there. 6.5 Trillion x 33% = $2.14 Trillon in HELOC paper. 30% is $1.5 Trillon of losses in HELOC paper alone.
Not including Alt-A, or the Neg ARM loans.
I thought we were headed toward hyperinflation, but I'm now joining the deflation camp.
"Give me Liberty, or give me... deathtotaxes"
