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

To: KyrosL who wrote (3961)	12/28/2003 2:32:22 PM
From: Haim R. Branisteanu	Respond to of 110194

one issue that may be working against inflation is the velocity of money and "just in time" supplies which added more flexibility to the manufacturing / retail chain and it's effects not fully researched in economic modeling and forecasting

To: KyrosL who wrote (3961)	12/28/2003 3:32:14 PM
From: Wyätt Gwyön	Respond to of 110194

in the seventies and eighties there was an even lower capacity utilization (see pages 8, 9) and that didn't prevent inflation hitting double digits. you are missing a couple things: 1. most important, the CAP-U troughs in the 70s and 80s happened during recessions; two years afterward, CAP-U was much higher. now, however, two years into a "recovery", CAP-U still sucks. this is unprecedented. 2. during periods of high inflation, there is a bias towards higher capacity estimates, so CAP-U is characterized as lower than in periods of low inflation. if inflation were running 10% right now, industries would be reporting much higher capacity (because they would have more ramp-up room due to higher anticipated prices, because they would having PRICING POWER, which is exactly what they don't have now...150,000 Walmart SKUs don't lie!), so the current production levels would appear as a much lower CAP-U rate. 3. post-70s and -80s recessions, there was strong real income growth. now, there is no income growth. this is another reason cos are reluctant to ramp up utilization.