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Strategies & Market Trends : ahhaha's ahs

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To: Ahda who wrote (1245)	2/26/2001 12:20:03 PM
From: ahhaha	Read Replies (1) of 24758

I can't emphasize how negative the steel price increase news is. What's that tell you about about capacity? What's that say about recession? How is it possible to raise prices during a demand slowdown? One might say that steel companies have raised prices, but that doesn't mean they will stick. FED has created an environment by money pumping that enables price increases to stick. They will say later that they took the money pumping action because whereas the action increases the risk of rising prices, the immediate risk of rising unemployment raised a more serious threat. FED denies the validity of the Phillip's Curve and yet they act as though this false theory is valid. Also, the steel companies are not raising prices because of excess demand, but because they know they can get away with it. Why? Reduction of supply. Low utilizable capacity makes a small increment of demand price inelastic because to produce a little more steel means a substantial increase in cost. This is the consequence of failure to modernize that comes from high tax environment. It's independent of international competition which has stabilized in its parity cost. The FED creates the little more demand that enables the price increase to stick.

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