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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED
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To: Jill who wrote (35100)4/1/2001 8:36:21 PM
From: Jim Willie CB  Read Replies (2) of 65232
 
Austrian School is very interesting
agreed with almost everything put forth
esp the distortion effect from Fed activism

been thinking a lot in last couple days about inflation and this economic environmt
I have routinely been chanting
"fight a ghost of inflation and you get deflation"
I think I have been too simplistic
you get a recession, which could in its early phase be accompanied by some temporary inflation
and that inflation might spook the Fed into abruptly breaking from their course of easing rates
this error was repeated all thru the 1970's and early 1980's

too many forces out there now can result in temporary rise in inflation:::
companies might hold onto excess workers, and compensate with higher prices
excess capacity is EVERYWHERE, and companies are gonna try to pay for it with product price increases
innovation is on hold as tiny companies are shut out for a while
(IPO and VC money is scarce if nonexistent)

here is a funny example of rising prices amidst shrinking business
in Pittsburgh the population is not growing
but welfare and schools and police/fire continue to cost
so property taxes were hiked between 40-80%

I am watching gold and related stocks

I think Greenspan now must make some very difficult choices, as a direct result of several colossal errors

should he: continue to cut rates aggressively, thus ushering in ANOTHER artificial boom phase in 2002 ???

or: show monetary restraint with continued gradual rate cuts, thus allowing the real excesses to work out, but ushering in a deeper more prolonged recession ???

/ jim
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