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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (3930)	12/27/2003 11:31:25 AM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Inflation now, deflation later says this author prudentbear.com I do not buy this analysis. The fact of the matter is that in spite of doing everything they can to a) start inflation in the price of goods b) start inflation in payrolls so people can pay off debt c) create jobs The FED has failed. There is no indication the FED will succeed either. Deflationary forces such as LOSS of jobs and LOSS of wages coupled with staggering debt and rising bankruptcies has been too much to overcome. Japan did not succeed at inflating its way out of the bubble and neither will we. The Fed can pull us back by tightening -- if they do, it will cause significant deflation-like forces in the U.S. before private employment has fully recovered. It is likely the Fed is in a holding pattern for the 2004 election year. That snip is partially correct analysis. Tightening will cause significant deflationary pressures. The second half of the senetence "before private employment has fully recovered" is a problem. A huge one. The assumption is that employment will recover. I disagree big time. Employment (both numbers of jobs and quality of jobs) is in a deflationary spiral and nothing is going to stop it. market will make the Fed act at some point. The FED has shown and talked that it will not be forced into doing something that it does not want to do. Everyone comes to the proper conclusion that hiking rates will kill the economy, yet everyone somehow thinks the markets will force the FED to kill that economy. It really makes no sense. No jobs .... No rising payrolls .... No money to spend. No money to pay down debts .... more debts that need to be wiped out. More bankruptcies. Show me more jobs and more quality jobs, and rising payroll taxes and then and only then can we talk about inflation. The tailwind of home refinancings is over. What's the next miracle to keep this from imploding? Mish

To: marginmike who wrote (3930)	12/27/2003 1:00:46 PM
From: Haim R. Branisteanu	Respond to of 110194

the corporate debt is much more acute in Europe. The main problem they have there is that corporate debt is mostly with commercial banks and not effectively distributed as in the US (e.g junk bonds). Many big European banks are in deep trouble. FUrther the price of housing and the debt on RE per SF is much higher than in the US. It is all relative. The only thing going for the US is it's population growth and relative low burden of the elderly. In the US those aged above 65 years are 12+ % of the population and in Germany for example 18+%. US population grows at a rate around 1% Germany France etc. stagnated in population growth. Social services are much more generous in Europe v. US which is an additional burden on public debt.