this is a bit long, but author Eric Janszen espouses an extremely interesting theory ...
(snip)"As of mid-March 2006 when I restarted iTulip.com, I ask myself a similar but revised question: If net foreign acquisition of US financial assets has grown from 50% to 80% over the past several years, and this growth is largely responsible for funding US trade and fiscal deficits, as well as consumer spending that represents 70% of the US economy and housing that has created more than 43% of all private sector employment since 2001, what is the chance that this rate of acquisition will continue to increase from 80% toward 100% versus decrease, given the eight conditions that exist today that make a "Poom" type event more likely?
What it really comes down to is this. If you believe that the US has a worse than 50% chance of losing economic and political control in the Middle East, you want to hedge the risk of the inflationary recession "Poom" that will result. And soon.
As in April 1999, you've been warned."(snip)
and a refresher course on his Ka-Poom theory ...
"(snip)Revised 2006 Ka-Poom Thoery
This is the essential paradox of current global imbalances that Ka-Poom Theory attempts to model and forecast.
The Fed does not need to go on a printing binge to produce the kind of inflation that the theory predicts. All the dollars that are needed to produce the inflationary "Poom" have already been printed and reside outside the U.S. as dollar denominated assets owned by {foreign- sic} individuals, institutions and central banks. In fact, if the Fed were to completely stop issuing new money -- stop the printing presses tomorrow -- the U.S. economy would fall into crushing recession, foreign investors would flee and the dollar money supply and inflation in the U.S. would rapidly rise. Why? Because every time a foreign holder of dollar denominated assets sells, they have to sell dollars and buy their own currency. If the Chinese, Japanese and Brits were to panic and all do so at once, suddenly demand for yuan, yen and pounds increases and demand for dollars falls; the price of the former rises and the price of the latter declines. If this happens in an uncontrolled fashion, you get "Poom," a cycle of a declining dollar, rising interest rates, a slowing U.S. economy, a declining dollar, and so on, until a free market valuation of U.S. interest rates and the dollar valuation is restored. "(snip)



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