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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (47813)	12/22/2005 12:55:55 AM
From: ahhaha	Read Replies (5) of 110194

What is the cause of the consumer led recession? Malinvestments in housing There have been quite a few recessions since WW2 and not one of them saw declining mean home prices. In any event the advent of recession has nothing to do with "malinvestment" in housing whatever that means. And, we can have slowly declining mean home prices and no recession. In fact, I believe we will see flat to declining mean home prices and good economic growth. Further, the term, "malinvestment" is oxymoron or worse. It can't be defined. It's another cliche term that doesn't mean anything. It seems to mean "unproductive investment". Are you saying that someone tries to invest and lose? On the other hand how can anyone know the outcome of an investment? Maybe you mean "misallocation of capital", but then that wouldn't be applicable to forces causing recession, but applicable to the opposite of recession, stagflation. Overcapacity Overcapacity? You simply do not know what you are talking about. Since 1980 we have had 4 recessions and until this month capacity has remained at an historical low around 77% for all those 25 years and recessions. You can't even define what you mean by "overcapacity". unsustainable negative savings rate I claim the savings rate is higher than normal and that the sources you can find claiming to the contrary don't know how to adjust for the changes in the form of savings. Should you hold idle cash balances in a MMF? Is that what you do? Most Americans have put savings into all kinds of investments. It isn't possible to separate what may be termed "savings" from investment. Indeed, in formal economics they're considered identical. outsourcing outsourcing causes recession? Outsourcing is a lower alternative cost of labor. You're saying engaging a lower cost of labor helps bring recession. What causes recession is rising interest rates and what causes rates to rise is lack of supply of labor and materials at an efficient cost. The result is rising prices and rates must rise accordingly. Outsourcing mutes this effect. falling real wages There have been quite a few recessions since WW2 and not one of them saw declining real wages. Not one! There's the balloon, inflated by monopoly labor for 50 years, and now getting its long overdue due. There's the source of deflation I keep repeating on this thread. home prices higher than people can afford There have been quite a few expansions since WW2 and all of them have been attended with a lack of home affordability. numerous things. You haven't given one because you have no clue what causes recession. I'll prove it. What causes recession is a lack of supply at any cost. See. You don't know what I'm talking about. Better proof: We are at the end of a cycle. There is no cycle at this time and there hasn't been one for some time, say, 3 decades. There can't be a cycle until there's world wide labor cost parity. Do you understand? Not hardly.

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