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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: yard_man who wrote (6606)1/31/2004 2:12:23 PM
From: russwinter  Read Replies (5) of 110194
 
I'm not able to get my computer to copy this as a link page, but it has some excellent remarks about "Inflation and Output Gap: Misleading Benchmark.

www.wachovia.com/ws/econ/view/0,,1509,00.pdf

It asks the question, "If the output gap drives prices then why are prices rising when capacity utilization is unchanged? Wachovia offers two theories, both of which I have elaborated on at length:

1. In a low inventory-sales ratio environment the real output gap is vendor performance if the purpose is to forecast inflation. and

2. capacity utilization may be picking up a lot of obsolete capacity in a post-NAFTA global trading environment where a significant portion of US industrial capacity is no longer relevant.

I think that's more correct than most at sleep commentaries, but it's merely the tip of the iceberg as the problem is not only "low inventory-sales ratios", it's more at the core, a complete trainwreck unfolding in a vast range of input commodites and goods.
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