[Homestead] US -China: Free Farm Trade Agreement

Leslie cayadopi at yahoo.com
Sat Dec 6 10:57:59 EST 2008


headline:  http://finance.yahoo.com/news/US-ag-chief-China-US-agree-on-apf-13763833.html
 
On the surface, this would seem like a good idea, to create exports for farmers and therefore a monetary contribution to the collapsing US economy.  But I suggest we look deeper at how currency rates could come into play with this ---- and the depression versus hyper-inflation debate which I 've been studying for a number of years now.
 
It starts with understanding that goods/services/commodities price inflation is caused by governments creating money out of thin air.  Central bankers "provide liquidity" in part by adding money to the money supply.  This devalues the purchasing power of currency.
 

 
(if I'm not allowed to insert charts etc - click on this link http://www.shadowstats.com/ slide down to see the chart on the right side YOY monetary base)
 
The US Fed is inflating the money supply at an historical rate, and are now embarking on the path of monetizing the debt - the final nail in the coffin.  This will have unavoidable effects down the road - it leads to the road to hyperinflation.
 
A simple explanation to understand that the Central Bankers of the world, including the Fed, are the cause of inflation, as opposed to their charter of supposedly controlling inflation:
 
12 people (represent all people)
12 eggs (represent all goods/services produced)
12 dollars (represent all currency in existence)
 
Regardless of how many of the 12 people at any one time, create a demand for buying eggs,,, the grand total of all eggs can never be more than $12.00.  The ceiling on price is limited by the total amount of money in circulation.
 
Now, add in the Fed's printing press (see the chart above and look good at 2008).
 
12 people (represent all people)
12 eggs (represent all goods/services produced)
24 dollars (represent all currency in existence)
 
While the population hasn't changed, and the number of eggs hasn't changed, the grand total of all eggs can now be double $24.00.  Monetary induced inflation - not supply/demand.
 
While there may be fluctuations from time to time in individual "things" we buy (demand) the grand total doesn't change much.  
 
Soooooooooo back to my concerns about the topic.
 
When the US Fed iniflaties the money supply, which is a known fact, the outcome is two-fold - one inflation is just over the horizon, and two, the US Dollar devalues relative to other currencies (which is important in international trade).
 
What our stupid government  is proposing ignores is the effect the inflating money supply has on imports down the road.  Down the road when the dollar resumes falling relative to other currencies - our imports will become more expensive to us,,,, and cheaper to places like China.  China will be able to buy up our food supply CHEAP on the currency conversion.  And our government has just inked a deal to do just that.  The Chinese population using cheap currency conversions will raise prices thru huge demand.  
 
I believe the effect here will be food shortages, on top of food shortages we will be experiencing when the price of fuel resumes its uptrend.  (More on that and why oil will rise, in a bit).
 
Leslie
 
PS  Yes, massive deflation of assets [stocks, commodities, real estate] are currently ongoing.  The bond bubble is the next bubble that will burst.  
 
Another topic.... as inflation in commodities will resume when the M1 money supply created this year starts the trickle down process.  
 
Ahhh, and I see Ayn Rand fans........ you'll love my Greenspan Theory... 
 
 


      


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