Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: A.J. Mullen who wrote (8304)	5/8/2003 3:29:55 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

(continuing OT on deflation) I've always viewed a modest amount of inflation as oil to keep the economy moving. A key issue is that many prices (like wages) are very resistant to decreases in nominal terms. The only palatable way to drop wages is via a few years of wage freezes or less-than-inflation raises. If there is prolonged deflation I predict either labor troubles when firms try to cut wages, or unemployment when they shrink jobs instead (or just go out of business). Note also that real interest rates rise when you get deflation - nobody (except maybe some Japanese consumers) are going to suffer negative nominal interest rates. Peter

To: A.J. Mullen who wrote (8304)	5/8/2003 4:01:04 PM
From: Ian@SI	Read Replies (3) \| Respond to of 52153

OT continued (at the risk of annoying Peter, so I'll refrain from further public Deflation related comments.) Chip price reduction and the resulting reduction in consumer electronic prices has resulted from typical boom-bust cycles. Too much capacity is built. Prices collapse when demand falls short of expectations. The same phenomenon occurs throughout the economy. It's just much faster with chips than with steel. DRAM is an extreme example. In 1970, it cost about $4M for .25MB of core memory; today about 256MB of DDR SDRAM can be purchased for less than $100. Clearly, there's been impressive innovation contributing to lowered prices. Prices plummeted because Demand was overrun by Capacity. This applies to the general economy with Capacity Utilization near 76%. Companies won't have pricing power until Utilization approaches 90%. Thus, the deflationary climate. Ian