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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (27962)3/7/2005 10:45:59 AM
From: mishedlo  Read Replies (2) of 110194
 
Mish should explain to us why it was that we did no enter a deflationary period in the first half of the 1990's.

Glad to.
It is very simple:
1) RISING WAGES
2) ABUNDANT JOBS

Now we have rising debt, lower pay, fewer jobs and even fewer high paying jobs.

That mix also explains exactly why Walmart was unable to raise prices at christmas, why GM and Ford can not raise prices, etc in the face of hugely rising input prices (PPI).

Houses are rising because hot money via loose lending practices is chasing assets. When the primary assets of everyone starts falling so will consumption. The ONLY thing keeping spending up right now is rising asset prices and a booming construction industry (housing).

No one can look ahead and see what happens when the latter ends. Inflation models see this boom going on forever.

Mish
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