Inflation vs. Deflation -
Inflation side
1. FED incresing money supply at >8 % rate
Deflation side
1. 2+ Trillion in Paper money gone due to tech collaspe. This is the BIG Kahuna.
2. Federal governmnet still runnig fiscal surplusof 3-4 Billion per week, 2001 surplu to be over 150 Billion - money extracted from a 8 Trillon dollar economy.
3. Default on junk bonds destroy money.
4. Worldwide slowdown keeps commodity prices dropping.
The Deflation side wins with the first item, the tech collaspe. The second item doesn't help.
Long term (2-3 years) inflation will come back.
Something needs to be done to change this. Having the Federal government run a slight defict would be a good idea, especially if we could get some thing useful, like better interstate highways, more airports, cures for disease, more appropriate military weapons, etc.
Another tax cut would be damn good idea also, but probably not politically feasible.
The next item to drop is likely to be real estate prices. Having your home value drop will have real wealth effect.
That's one reason I staying away from REITs right now. Might be good After inflation starts. There was some study that said that REITs do best as inflation starts slowing, because they can raise rents to catch up, but after that, inflation stops. |
