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August 04, 2007


Michael Heraghty

Interesting point about the yen carry trade.

But don't you think that the US dollar is also sliding because Americans are living beyond their means, and have been for years? The US national debt is staggering, currently working out at around $30k per US citizen...

A Reader

The influences the subprime market will have on the overall economy is unknown. The fact is that the subprime market is a small protion of the overall lending market. The number of defaults in the subprime spectrum is very small at this time. There is no way of knowing, a this time, what effect a complete meltdown of the subprime market will have on lending institutions. The question you should be asking yourself is why the Federal Reserve is so concerned about inflation. It's simple, yet nobody seems to be talking about it because they don't think it's a problem. It's called fiat money. Here's an investopedia link for you Now if you would like a real interesting read, pick up a copy of Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay. There you will learn about various forms of fiat money and what happens when "The Crowd" loses faith. Those carry trades you hear so much about are just the banks and large speculators being pinched. They make a lot of noise when they get pinched. They provide liquidity, not value. Remember this and you will understand what is happening more clearly, the banks and insurance companies are not the economy. But rather corporations and small businesses form the economy. It is when people become fearful that economies are hurt, not when the banks are making noise. What we need to worry about is fiat money and hyperinflation.

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