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

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To: russwinter who wrote (53553)	2/12/2006 1:00:17 PM
From: kris b	Read Replies (1) of 110194

O"k, I'm going to weigh in on the "deflation" debate. I think we are headed for one in asset prices, and the Minsky theory nails it. This is not the same as input goods prices however, and both Minsky and Fisher make a clear distintion, and so do I. I think commodities and input goods will deflate some (depends on degree of gearing and speculation), but not nearly to the degree that financial assets do." What if we have depression twice as bad as 1929-1933 (due to a lot more debt/leverage). Will commodities (with world GDP going down 50%) resist the collapse. I don't think so . Check charts of commodities in that period. The main cost component of the price input is labour. In 1929-1933 the labour rates (for those employed) were kept artificially high, preventing cost input from going down. Today we have world labour arbitrage therefore this component will go down as much as anything else, while countries are fighting for survival. "Are there any states that have run non-Bubble economics, or where excessive gearing has taken place?" Which currency do you want to hold in this scenario?

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