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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: orkrious who wrote (189517)8/27/2002 11:16:32 AM
From: reaper  Read Replies (1) of 436258
 
<<for "necessities" we import, if demand falls by a percent because of a weak economy and the dollar is falling by five percent, we are going to have higher prices. >>

dood, if demand falls by a percent in the US for stuff that we import, prices are going to COLLAPSE. prices are not set by currency regimes, they are set by supply and demand and the marginal cost of production. there is excess capacity worldwide to produce just about EVERYTHING; if US demand falls that will expose more excess capacity, which will cause prices to FALL to soak up whatever of that capacity is possible, as fixed costs are generally high (including debt services) and variable/marginal costs (raw materials and labor) are generally low.

of course, demand falling in the US will also have the effect of torpedoing the economies of the companies that we import from, which will expose more excess capacity, and so on and so on and so on. i personally think you can pretty much count on the prices of manufactured goods falling for the forseeable future.

i also expect prices for 'services' to on the whole fall. remember that 'owners equivalent rent' is about 22% of the CPI, and that is going to start heading down if the housing bubble cracks. healthcare is the one service that will likely NOT decline in price.

Cheers
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