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To: Joan Osland Graffius who wrote (160995)	4/19/2002 2:49:58 PM
From: Mark Adams	Read Replies (3) \| Respond to of 436258

Jimmy Rogers is probably correct that we will have commodity inflation Countervailing force: productivity improvements elsewhere in the world. ie, Russia/China for base metals, Ni, Cu and so forth. As they adopt western process improvements financed with western funds. This doesn't require quantum improvements potentially possible with nanotech or bio-engineering that may occur. See example: Coffee. Reportedly trading at 30 year lows late last year. Why? Excessive planting in Vietnam and Central america. And you have palm oil (which can be converted to lubrication and even energy) plantations putting pressure on soybean oil/products. Best case I see for simple commodities: a near term stalemate as demand puts pressure on prices while supply continues to expand. Overall, thinking in terms of a decade, I think the amount of the consumer basket consumed by commodity expense will shrink as a percentage of the total. None of this is well researched (though Marc Faber reportedly developed historical data that showed commodity deflation to be the long term norm) just seat of the pants commentary designed to encourage the free flow of ideas.

To: Joan Osland Graffius who wrote (160995)	4/19/2002 3:13:54 PM
From: reaper	Read Replies (2) \| Respond to of 436258

Joan -- IMHO there will NOT be commodity inflation, at least in long-term time frames (i.e. I don't want to guess where the CRB will be in 12 months). It is not a mystery to anyone that the price of a commodity in the long-term is the cost of production of a marginal unit (plus some return on capital for the producer). A combination a technology & productivity improvements and exploitation of lesser-developed nations has kept commodity prices in multi-decade downtrends and will continue to do so. Of course a wild-card is the US dollar (the high dollar has kept commodity inflation as realized by US consumers low) but I am inclined to think that the dollar, while over-valued, is only over-valued by 20% or so which will IMO more likely limit deflation as opposed to cause inflation. I don't think that the bull market in bonds (govies) is over; I am even more sure of this opinion when I read that everyone, from Bill Gross to Martin Barnes to Jimmy Rodgers to the editors of Barron's thinks that it is. I still think we see a 3-handle on ten-years before the end of CY03. I am not wedded to this opinion, however, and as most on this thread know I have a sizeable stash of TIPS to hedge my low inflation opinion. Cheers

To: Joan Osland Graffius who wrote (160995)	4/19/2002 5:34:08 PM
From: Mike M2	Read Replies (1) \| Respond to of 436258

Joan, don't worry about it we are all doomed! -g- . deflation follows a liquidation of private debt. I think we can all agree that there is a limit as to how much private ( business and consumer ) debt can be serviced and I think AG will find that limit and beyond. It is easier to influence the supply of credit than the demand. At some point the demand for credit will contract- either by choice or necessity - see Japan. The Fed has tipped their hand by floating the notion of buying private debt and stocks - I have thought they might do that but kept my mouth shut until they said it first. I think this will delay the inevitable. I feel that the inflation of credit, financial assets, real estate in some areas has been so great that a retrenchment is inevitable. The inevitable decline in the US $ will certainly cause the price of imports to rise but the decline in US debt fueled consumption will impact global demand so we have to see how this plays out. The US cannot be the credit based engine of global growth indefinitely. Staglflation is possible but I feel that the corrective process of unwinding all the excesses, malinvestment and maladjustments will overpower attempts to reflate. I do expect AGs next attempt to reflate will exceed the post 9/11 injection - he will continue until the dollar tanks. I also expect defense oriented deficit spending in an attempt to keep the economy going. Remember how the price of oil declined when Asia tanked? Many nations need revenue and will increase production of commodities to offset the decline in unit prices. Whatever flation we get there will be TL & EV - that is not a MYTH ! mike ho ho ho

To: Joan Osland Graffius who wrote (160995)	4/19/2002 7:00:02 PM
From: Perspective	Read Replies (1) \| Respond to of 436258

People talk about the 'flations all the time. Will we have inflation or deflation? The answer is: yes. We will probably have both. We have had both, in spades, in recent years. History suggests capitalist systems operate most efficiently in an environment of stable pricing for everything. Of course, that doesn't happen in reality. You have idiots that have kept adding capacity, which results in relative deflation at the finished goods level. The excess money ends up finding its way into other things, though. It chased stocks, and now real estate, resulting in significant inflations there. Remember, it's all supply and demand. People can only consume so much crap, and then the excess money flows into the assets catergory: stocks, bonds, homes. Unfortunately, the conventional wisdom is that commodity and finished goods inflations are "bad", and asset and stock inflation are "good", because they make debtors and creditors both look better and encourage further monetary creation. The reality is that monetary stability is the only right move for the long haul. BC