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To: SemiBull who wrote (3440)	5/29/2003 8:48:59 PM
From: Kirk ©	Read Replies (2) \| Respond to of 3813

How can property values to even hold firm when the white collar job flight - see todays WSJ from what I heard on this same topic midday EST on CNBC, for example - won't be coming back? I bet some are still waiting for CA real estate prices to drop once the Gold Rush ended 150 years ago. As for debt service, I believe you need to look at it on a percentage of cash flow just like for a business. I read the economy isn't coming back hard on lower rates because people are refinancing and using the lower debt service cost to clean up their personal balance sheets including increased savings. This is GOOD for the long term.

To: SemiBull who wrote (3440)	5/30/2003 2:52:38 AM
From: Cary Salsberg	Respond to of 3813

RE: "...if you carry out deflation to its logical extension..." First, I am using the term "deflation" as defined by most economists. I am not sure what the "logical extension" really means. The logical extension to inflation is not hyperinflation, but that has always been a concern. We have had job exports for quite a while, now. There is almost no US manufacturing sector compared to previous generations. Now, white collar jobs are following blue and this will continue. In a deflationary environment, home prices will fall. If you think of it, it makes sense for older houses to be worth less than they were when new. Housing need not collapse because people will still value home ownership and the cost of financing will be very low during deflation. Home buying will become more prudent because a home will be considered a depreciating asset and will be bought for shelter and not "investment." I agree that an adjustment to low inflation and deflation will be required. There will be the inevitable dislocations, but I don't think panic is necessary. With an aging population destined for years of relatively fixed income, the idea that prices will fall over time is much more pleasing than the thought of falling behind inflation. My conclusion is that deflation is not the same as the Great Depression and may be managed to provide a stable economy which will allow the real standard of living to improve.