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Strategies & Market Trends : Classic TA Workplace

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To: Perspective who wrote (21262)	11/15/2001 12:04:33 PM
From: ru2	Read Replies (2) of 209892

Great post! I will be chewing on this one for a while. A few questions come to mind immeditately though. You say there is no pent up inflation risk and mention asset deflation. Do you mean that a person with just cash is going to retain roughly the same buying power over the next decade? Do you see the Dollar declining severely against the Euro or the Swiss Franc over the next decade? Has there ever been a period in history, in which a Goverment could dramatically increase the money supply and keep that money concentrated amongst as small a percentage of the population as has happened this time? If the awnser to the above is no, do you think one of the reasons that it has happened this time is in large part due to technology? The "New Era Economy" people were saying all the way to the top that everything was different this time because technology had changed the cost in production of goods. While we certainly have more kinds of products than before, what has struck me as much more "different this time" was the way technology concentrated control of those goods into the hands of fewer and fewer people. Maybe I'm wrong but it seems to me that Bill Gates has more control over my computer than Ford ever had over cars. Thanks for your thoughts R ########################################################### Going forward, it means there is no pent-up inflation risk. The inflation that is going to happen from the exploding money supply has already happened; it's just limited to asset inflation. Capacity and employment conditions will see to it that we see no commodity inflation, no wage inflation, and low interest rates for the forseeable future, potentially ten years or more. Future money supply increases will be increasingly limited to asset inflation, but with the value of the underlying corporations declining at rates comparable to the money supply increases, the absolute price level for equities may go either way. But here's the huge conclusion: when the money supply increases cease, there is another massive asset deflation looming. Keep an eye on that money supply; when the Fed runs out of pedal travel, the S&P will finally succumb to the gravity as we've all predicted.

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