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To: BGR who wrote (78992)	12/9/1999 5:59:00 PM
From: KeepItSimple	Read Replies (2) \| Respond to of 86076

>1. Why, then, are consumer prices not increasing in the USA? Who are you relying on for the statement that consumer prices are not increasing? Last month it was reported that new home prices were up 14% FOR SEPTEMBER ALONE. The thing people refuse to understand is that a tube of toothpaste is not going to increase in price. The things that people spend their new found stock wealth on are: Houses Cars More stock USA Jaguar reported sales increased 75% over the last two quarters. Housing prices are skyrocketing everywhere in this country, but for some reason the fed uses a "model" in which they base housing prices by extrapolating what the average rental unit in an area would go for. They literally dont even tabulate the actual selling prices of new homes. Nobody I've ever spoken to can explain why they do it this way. And stocks, as we all know, are rising at roughly 100% per year. Do you even know the 15 components that make up the CPI? It is things like tobacco, a yard of 100 thread per inch cloth, and other mundane items. They exclude the biggies, such as food and energy, so what you are left with is a complete joke. You also get the data skewed because computer prices have been decreasing, while speed has increased. They actually have a formula that calculates the price per instruction operation. Every time Dell and Gateway release a new PC with a faster CPU at the same price, the CPI goes down. Literally. Just go and buy a new luxury car. Or a house. Or a share of any nasdaq 100 stock. And then tell me there is no inflation. And

To: BGR who wrote (78992)	12/11/1999 11:06:00 AM
From: Mike M2	Respond to of 86076

BGR, here is my reply to your ? concerning the absence of product price inflation. ho ho ho Mike Nadine, there was a time when the term inflation meant a decline in the value of money. todays political economists tell us that inflation is a rise in the general price level as measure by the cpi and ppi. The Austrian school of economics defines inflation as an increase in money and credit beyond the needs of economic growth and the supply of available savings. This is what the Nobel prize wiinning Austrian economist had to say about inflation: " The influx of the additional money into the system always takes place at some particular point. Who these people are will depend on the particular manner in which the increase of the money stream is being brought about. It may be spent in the first instance by government on public works, or it may be spent by investors mobilzing cash balances or borrowing for the purpose; it may be spent in the first instance on securities, on investment goods, on wages or on consumer goods. It will then be spent on something else by the first recipients of the additional expenditure, and so on. The inflation process will take very different forms according to the initial source or sources of the additional money stream" F.A. Hayek Can We Still Avoid Inflation quoted in the May 99 issue of the Richebacher Letter 1217 st. Paul St. Baltimore, MD 21202 We have not seen product price inflation because the inflation has been directed at financial assets. Companies have decided to go on a buying binge purchasing their own shares rather than expand their business or invest in productive capacity. In addition, as noted by Earlie the US trade deficit has enabled us to import real goods and deflation to offset the inflationary pressures of the US consumption binge fueled by debt and the wealth effect of the stock market. Another major factor in this unprecedented credit bubble has been deregulation in the banking sector and financial world. For details read Peter Warburton's Debt and Delusion and Edward Chancellors The Devil Take the Hindmost . A very short summary is after the banking sector was decimated by the real estate bust the capital markets took up the slack. Nonbank sources of credit are not captured in the monetary aggregates and are beyond the control of the Federal Reserve. There is an inverse relationship between the quantity of credit created and the quality - a very obvious point that credit originators periodically forget in a big way but that is the moral hazard created by gov't guarantees. I once was foolish enough to believe that at some point the people in power would attempt to check the speculation but the most important lesson to be learned is that greed takes control. Alan Greenspan is well aware of the austrian perspective and knows very well the bust of the credit boom is inevitable. I expected too much from a politician. mike