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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (61276)5/18/2006 9:16:05 AM
From: russwinter  Read Replies (4) of 110194
 
Time for me to weigh in on the US inflation debate, and I'll say up front, "not so simple". Prices for US consumer goods are going to go much higher, because China can no longer produce goods below their true cost (when properly accounting for negative externalities like pollution and bad loans).
xanga.com

I also feel China is going retrench and shut down a good chunk of their bloated exporting base. They will do this via environmental controls, withdrawing credit and currency adjustments. They will also redirect resources and capital away from the failing export model and towards internal needs.
Message 22457494

One irony of all this will be to take some of the wind out of the commodity bull. Bulls in that sector playing the endless China growth story will be disappointed. The other irony will be less product, at higher prices for US consumers, and less US consumer and housing Bubble vendor financing= higher interest rates AND higher prices AND fewer goods. This will of course over time diminish demand for Asian consumer products, and contract the trade imbalance.

Net effect on inflation in different sectors:

-commodity prices cool

-US consumer goods prices increase

-Owners equivalent rent begins to overstate inflation going forward just as it understated it in the last couple years

= high CPI numbers and import prices, but cooling input goods prices
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