Porc,
>>Then why not get rid of money entirely, and go back to barter, thus
eliminating the business cycle, unemployment, and any and all "monetary" problems.<<
Money serves a very useful purpose. It facilitates exchange. Ex. If I produce computers I can't very well cut one of them in half to exchange it for something I need that is worth one half the value of my computer etc....
However, the amount of money in the system that facilitates that exchange need not vary to accomplish the task. Money makes things more efficient.
>>Thus, wages were falling as output per worker was going up, a very
perverse situation, both economically and politically. <<
Aside from the perceptions of a public that may not understand reality, I have no problem with falling wages as long as the prices for goods and services are falling faster. I have no stats on nominal wages, but real wages must have been rising. Personally, I would gladly take a 3% pay cut every year in dollar terms and accept no interest on my cash balances if prices were falling by 7% annually.
No one is offering that deal though.
>>Btw, as you know, in last week's Barron's AS devotee Gene Epstein argued that signs of malinvestment are not yet showing up in the macro economy. What is your reaction?<<
It had no effect on my investment decisions for a variety of reasons. I get at the values from a different approach.
My own view on the matter is that most of the misallocation in this cycle is in the financial asset area. (highly leveraged stock and bond positions etc..) So I am highly skeptical of the profitability of businesses that have benefited from the Wall St. boom.
I would also "guess" that there are consumption excesses related to many people not understanding market valuation, expected future returns and the sort. Some people are living beyond their means but don't know it yet.
I am requiring a higher margin of safety in my restaurant investments. That's the only place I venture that I think is vulnerable. I generally make these sorts of judgments by looking at aggregate returns in the industry and trying to estimate the sustainable levels.
I am also not at all surprised that the stats show that everything is cool. That's what I would expect. Credit is stimulative and we are still in an easy credit environment.
Wayne |
