GM, boy that was loaded post...two actually.
A proper response would take at least a Master's level
economist rather than the Bachelor's level here on
this thread. But here goes:
1. <...In fact, some economists are looking for - and finding - deflation...>
Well, Econ is one of the most imprecise and 'interpretive'
studies on the planet -- perhaps second only to 'Sociology'
Thus, Economists can look for - and find - just about anything
they want to find.
2. <...Richard Salsman, senior vice president at H.C. Wainwright Economics,
a firm that uses precious metals prices to forecast interest rates...>
I start questioning the sources right here. Predicting tomorrow's rates
from metal prices today is backwards from my viewpoint. Taking the
case of stocks, you could point to some circumstatial occurances where
share price predicted earnings. But there are far more many cases where
earnings will correctly predict tomorrow's share price
IOM, today, actually dropped until the after the earnings report.
The report turned out to be much better than expected. Tomorrow, we
will see what happens, but the share price drop, as a prediction of
earnings, was an incorrect forecast. I think a corresponding picture
of metals/rates is more accurate.
3. ''The price of gold is not falling because central banks are selling,''
Salsman wrote in a report. ''Central banks are selling because the price
of gold is falling.''
He's guessing. You have to, in effect, say, "I think consumption is
falling, which will make prices fall, which will make rates fall, so that's
why gold is falling." How about this, "The stock markets are kicking butt,
so everybody is putting their money into stocks, and as a result, you
have to practically give gold away to interest investors."? I think
that's much more plausible.
4. <...What makes economists think the economy is deflating?...>
Ummm, they have lots of extra time on their hands?
5. <...Jennifer Moran, associate economist at Donaldson, Lufkin & Jenrette
in New York. General Mills Inc., for example, recently raised cereal prices
3.5%, but other cereal makers haven't followed as they usually do...>
Back in the days when you had only Corn Flakes or Cheerios from which
to choose, cereal makers experienced little price elasticity. The market
is much more competitive now, particularly since America has become
more health conscious and the smaller, 'home-grown' brands have taken
root in the market. It's a savage market and Jennifer's point is a case of
competition, non-evidential.
6. <...A key gauge DLJ uses to measure new demand is the number of
people turning 25 - a period that marks the start of young families' peak
buying years...>
Good God - DLJ is still using that as an indicator?! Welcome to
the '90s. People these days are just barely getting married at 25, and
quite a few are much later. When the average marriage was lower, say
20-22, then 25 might have a "start of peak buying years". For today,
you can move that up to around 30.
A lot of 25 year olds are just barely getting out school these days --
the 4 year degree is over. Go visit a college today, and stop by the
Admin office to ask what the average time to graduation is these days.
Don't be surprised when you hear, "Oh about 5 - 6 years". When they do
get out, they are generally making more money. I suppose one could make
a deflationary argument as these kids sometimes make more money than
they know how to spend...(and few of them are worth it, I might add).
I'll forego the German economic remarks as GM probably has a better
handle on that part. I would guess, however, that re-unification is
rather hard for an economy to absorb all at once. In my opinion,
it would take many (6-8 years for the DDR to make a smooth transition
'into the fold'. After the economy is built up, then you still have a
few (3-4) years for the demographics to accumulate enough money to
go on spending sprees. I think the German economy will start a boom
in the next year or two. (just wild-ass speculation)
-MrB |
