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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: pogohere who wrote (75199)12/10/2006 6:41:47 PM
From: mishedlo  Read Replies (1) of 110194
 
why are prices rising now as opposed to not rising before (over meaningful periods)?

There is a simple explanation for that.
1) Productivity and globalization masked the inflation in the 90's. Instead of prices of goods and services going up, stocks went up. Everyone thought it was the "greenspan productivity miracle" when what really happened is inflation (an expansion of money and credit) was masked by productivity and outsourcing. Stock prices reflected that inflation.
2) When Greenspan flooded the world with cheap rates in 2002-2005 home prices went up. Home prices show up in the CPI but the share price of CSCO does not.

The key points here are
1) The Fed can print but it can not dictate where the money goes
2) Greenspan got away with a ton of inflation because of globalization and productivity masked it for a long time.

Mish
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