DEFLATION is great when you are paying your suppliers, but not a good steady phenomenon to work its way month in and month out for an economy... imagine the S&P as a whole experiencing lost pricing pressure which outpaced its declining supply costs... the result is declining profits, lost capital for investments, R&D, followed by layoffs, lost bonuses for best workers... a mess
what most people lose sight of... is that deflation for many industries results in declining profits, which is a CURSE to stockholders
we are seeing deflation in communications generally... it is good to see the inefficient dinosaurs like ATT and RBOC's get slammed around... I love it... bring in the nextgen companies with their much much lower cost structure based on cheaper more efficient technology, like fiber optic
bring in the nextgen companies like theQ with their better wireless technology... some people who might have bought a PC will instead buy a handheld PC like a portable digital assistant, provided it has a wireless modem and features with email and internet access... much cheaper cost and alternative to a $1500 PC
in autumn of 1998 our economy got a wicked scare of deflation... the FED done good in providing liquidity to counter the threat... forget the LTCM bailout... now we are stable again... any deflation is likely to be in industry pockets and very beneficial
how about a longdistance phone call NYCity to London for the same cost as NYC to Boston??? it is coming with advanced fiber optic... how about a wireless call from Boston to Philly for the same cost as landline call from Boston city to Boston suburbs??? it is coming... that is good deflation
generally speaking, widespread bigtime deflation is devastating!!! ... good point about debt against assets showing declining value... if real estate had huge deflation, then mortgage backed securities would fall, then bonds generally, then stocks in domino fashion
but agreed: pockets of deflation like in telecom that displaces the horribly inefficient GSM's of this world is a great step forward... some of the imminent deflation in wireless is due to rapid rampups in subscribers and nice beneficial economies of scale
go Q, jim |
