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Strategies & Market Trends : Classic TA Workplace
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To: At_The_Ask who wrote (66857)2/20/2003 11:01:18 AM
From: Perspective  Read Replies (4) of 209892
 
I know I missed out on the bulk of the inflation-is-good stuff, but:

That's one of the blind spots for this Fed - the assumption that there is such thing as a "general" level of prices. I've argued for a long time that, since price movements in either direction are a sign of imbalances in industries, the only logical conclusion is to take an RMS (root-mean-squared) approach to price stability. In other words:

1. a 10% increase in the price of gasoline is a bad thing
2. a 10% decrease in the price of clothing is a bad thing
3. two wrongs do *not* make a right; in fact, they make twice as many wrongs

Our present system allows them to "offset" each other, when they are indicating increasing instability in the monetary system.

The inflation that the Fed is now producing is in hard assets, the inputs to corporations. This will further squeeze corporations, resulting in reduced profitability and more layoffs, which perpetuates the deflationary spiral.

Will positive feedback from the layoffs overwhelm the desired impact of holding debt loads in check? It all hinges on the amount of leverage. To the extent someone can be unemployed without impacting other economic participants, the positive impact wins. However, the higher the level of debt-based consumption, the greater the tendency of the negative effect to predominate. Can you guess which side of the ledger I think this falls on?

Have I mentioned lately that this will all end so badly?

Would somebody please help me wake up the pilots before we end up as economic wreckage? <ng>

BC
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