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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: David Michaud who wrote (2557)	9/5/2000 6:53:36 AM
From: Arthur Tang	Read Replies (2) \| Respond to of 3536

You posted such thorough view on inflation that I couldn't help but respond to your post. The only thing that you missed is the supply and demand equation in all the peripheral issues, you raised. Of course, the new economy planners concentrate on supply and demand issue. To bring inflation back to the dollar value of the 1950s, the planners had to start with beef in the US. Ground beef was 99 cents/lb. It is 99 cents/lb now. Beef production takes 3 years and has to be stocked in inventory in various stages. So, the price is fairly well protected by the abundance of inventory. Old beef had to be liquidated for a lower price. Some products are not widely demanded, therefore, supply may be behind demand and cause a temporary inflation. Automobiles are the worst case, where technology content of an automobile is so much that you can not compare with a 1950s automobile which cost only $1850, a dollar a pound selling price. So, when you view inflation the products have to be exactly the same without any design changes which may offer better standard of living. As the world modernize, production capacity keeps on increasing; so supply increases to have less unemployment. Higher wages then create affordability. Forcing prices down by virtual of buying power. It has been known for centuries, you have to buy wholesale, never retail if you want it cheap. Federal Reserve banks in the US has yet to learn that. It is no longer top down economy, but microeconomy, where supply and demand is tamed by production capacity and plenty of money all over the place. Wages improvement will actually lower product prices due to obsolescence and replacement theory. So much for that, and what else could be new?