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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (2321)11/18/2003 6:16:32 PM
From: Wyätt Gwyön  Read Replies (2) of 110194
 
while commodity prices soar, they actually don't create any pricing power on the part of industries outside of the small commodities producer sector. the conclusion therefore is that margins are squeezed, and that has a deflationary effect in an economy that is entirely dependent on rapid debt growth.

exactly. just what i said regarding the inflation head-fake from commodities:

if you look deeper, you will see that a lack of pricing power (reflecting a lack of consumer buying power, which reflects a lack of income growth) means contracting margins. as margins contract, capacity is eventually idled. hence low Cap-U. hence more: deflation. think of deflation as a disease which can spread throughout the economic tree.
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