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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (7202)	12/8/2002 3:31:37 AM
From: Elroy Jetson	Respond to of 306849

Other than post-bubble asset price declines, I don't see any deflation in Japan that doesn't exist world-wide. Maybe I'm unimaginative but I find it difficult to characterize the collapse of a bubble as a lack of demand. I would characterize post-bubble Japan as a gradual return to sanity with a serious hang-over. Personally I believe the current deflationary pressures have resulted from: 1.) the integration of raw materials and labor from regions not previously fully part of the world economy, particularly the formerly communist countries (this is off-set by inflation in those regions); 2.) the reduction of production sent into the black hole of the Cold War - although just like "Brave New World" a new inflationary world conflict with some Moslems has conveniently appeared; 3.) over-investment in productive capacity. I'm skeptical of the impact of alleged technology efficiencies, apart from out-sourcing to lower cost economies. Do efficiencies such as shorter product development times, when all competitors are on the same footing, really lower costs? You can achieve a faster change-over from Simpsons merchandise to Sponge Bob Square Pants. How do you quantify that? Does a computer with twice the megaflops make you more than modestly more productive? As for a Keynsian off-set to deflation - I have no doubt that central banks in theory can easily devalue money by producing more, a disguised competitive currency devaluation like the 1930s. But when all central banks follow this action the internal inflation from higher import costs and jobs from increased exports one would expect from a cheaper currency will not occur. It would seem that the excess money appears in sporadic bubbles of financial instruments, stocks, bonds and real estate, rather than an increase in general price levels. Apart from an increase in financial instruments, like real estate and bonds, the only inflation I see is in the pharmaceutical / medical monopolies. I don't think this sheds much light on general price levels as their pricing is a function of political power, like a transfer payment, rather than a market function.