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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (26096)	12/14/2002 12:26:03 AM
From: AC Flyer	Read Replies (1) \| Respond to of 74559

>>welcome back<< Rumors of my return have been greatly exaggerated. I read your linked items. Liked this a lot - well worth posting again as it draws a critical distinction missed by most: >>Currencies: The Case for a Stable Chinese RMB morganstanley.com Stephen L. Jen (from Hong Kong) "....First, though China may very well be putting downward pressure on global tradable goods prices, I believe this is good deflation, something that the rest of the world should be pleased to see, just like a fall in oil prices. A critical distinction between good and bad deflation should be made by commentators on China’s RMB policy. The type of deflation exported by China is ‘good’ deflation — the kind caused by low-cost production. In contrast, the type of deflation exported by Japan is ‘bad’ deflation — the kind resulting from inadequate demand. If an American consumer needs to now pay only US$10 for something made in China that he used to pay US$30 for when the item was made in Mexico, is this deflationary? Clearly it is not! While the individual good's price will fall, the consumer will spend the US$20 saved on something else. There is no reason why overall demand should fall, or the general price level should fall...."<< Yes, yes and yes! Falling product costs = good deflation. The doomsters have abandoned the "Greenspan inflation" panic (i.e. Greenspan printing will inexorably cause hyper-inflation because the Austrians say so) in favor of the current "Greenspan deflation" crisis (i.e Greenspan has not printed enough to avoid deflation) without a moment's pause to reflect on what is actually happening. The US is in the grip of titanic positive economic forces, with an emerging recovery, increasing manufacturing output, huge productivity growth and strong personal income growth. Not much net job creation yet, but that is due to the productivity gains in manufacturing (i.e. more output, same number of workers). [And, you say, a mountain of corporate and personal debt. Yes, but the cost of servicing that debt is at historically low levels and our financial markets are deep and liquid and shall remain so barring a collapse in demand, which, as we know, will not happen until 2009 or so and, if we are lucky, perhaps not even then]. >>my YTD NAV gain is now at 8.54%<< Well done, Jay! But be careful - this could melt like snow in August if you are wrong-footed by coming events - the risk of Bust is now emphatically past - the probability now is that surprises will be heavily weighted to the upside, imesho.

To: TobagoJack who wrote (26096)	12/14/2002 1:26:47 AM
From: current trend	Read Replies (1) \| Respond to of 74559

I posted that article to you not to bait you, but to obtain an insightful analysis of it from someone who should know, that actually lives there real time. I have no way to validate the issues brought up in it as I have never been to China and am not in the business world. In reading that article I was struck by the constant drum beat heard in the press these days of China's coming and inevitable economic dominance of the world. In the 80's a similar echo was heard in reference to the Japanese economy as it had developed from "made in Japan" junk to challenging the world in autos and electronics, with a valuation at one time of the emperor's palace being more than all of California. There were even books about how the Japanese had become so economically masterful that they must have learned something that our esteemed Business schools might want to emulate. Then came the talk of the Asian Tigers and the fear in the West of further dominance by that region. In the last decade, fear of Japan and the Asian Tigers is no more, as they have been hit by inherent flaws in their economic and political structures that were unrecognized at the height of their respective manias. I wonder what inherent flaws, if any, are present and unseen in China that might ultimately side track the picture of overwhelming economic vibrance and prosperity that is predicted in all quarters and projected in all directions. Thus, is China's economic boom a myth? I still don't know, but, will be looking for facts and signs in the future to answer that question for me. CT