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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: reaper who wrote (240824)5/15/2003 12:52:51 PM
From: Perspective  Read Replies (1) of 436258
 
I think I've posted this before, but what I see can be entirely explained by three phenomema:

1. A crushing debt load on economic participants
2. Huge amounts of excess manufacturing capacity (at present currency levels)
3. Artificially depressed interest rates by a Fed engaged in an effort to eliminate #1

The crushing debt loads result in the reduction of demand wherever items are discretionary. The excess capacity means falling relative prices for goods produced with that capacity; the more capital intensive, the greater the relative pressure.

The huge print-fest by Easy Al raises the general price level, but the price response goes primarily to services with fairly inelastic demand (health care) and to basic commodities (food, metals).

It should be noted that this exacerbates the squeeze on corporate America, as they become caught between an inability to raise prices for finished goods and rising costs of inputs.

Of course, this may just be a case of beggar thy neighbor, since most of corporate America delivers services now anyway. Perhaps it throws the pain off on the rest of the planet, since they are our manufacturers now. But I think it pinches our supposed strengths, too - high tech gets squeezed hard in this scenario, too.

BC
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