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.

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

To: yard_man who wrote (6618)	1/31/2004 7:21:29 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

No, I think the outgap (however defined) is now gone, (as the 3Q number was given at only minus 0.5%). I'll wager that when it's calculated and announced for the 4Q that it will be near zero. And I think it always has been a bogus indicator, just one more thing for the Wizards to use to justify their egregious monetary policy. I'd like to get that date and the source (don't have it) when it happens, as it may be a significant bond market event. I agree with you that this is not a real recovery in the sustainable sense. It could fall off a cliff at almost any time. And yes, if it really fell off a cliff we would be facing a consumer/housing bust deflation. However, I see the cause of the bust as THE TRAINWRECK (maybe I should drop this hyperbole and just call it a "subsistence crisis"?)(), namely $39 oil, $1.47 copper, running completely out of nickel, spiraling food prices, spiraling industrial goods prices, continued transportation bottlenecks and shortages, etc, etc, etc. The spurting and stuttering economic is here now, and it's still easily causing enough demand (for excessive Asian goods production) for the outbreak of the substantial demand-push inflation, bottlenecks and maladjustments that's upon us. Further, when the rear view mirror numbers hit, it will infect the bond market with an inflation scare (rendering the Fed largely irrelevant). There could also be a major "risk premium" scare. That is unless the BOJ just doesn't care if other bond owners dump hundreds of billions of Old Maid cards on them AND agree continue to support our twin deficits. Very problematic, as they will need more than the $half trillion US in 2004 to buy and fund all that. And yes, I think even the half trillion spent on currency intervention is highly inflationary in this climate. It's all a real bad formula of credit/debt holders anyway you work it. () A description of France's 1788-1789 subsistence crisis taken from Roger Price's "A Concise History of France". I think there are parallels (if you add important modern goods like energy, metals, etc) to the input cost squeeze/crack up boom we've been discussing: "The economic crisis was further intensified by a poor cereal harvest in 1788, a year of drought followed by disastrous storms. The adundant wine harvest only led to glut and collapse of the price of what was for many peasants their only marketable crop. Cattle disease added to their problems. In 1788-1789 the increase in wheat prices was of the order of of around two-thirds above 1786 prices. As the French were forced to spend growing proportions of their shrinking incomes on basic foodstuffs, so demand fell for building work, for textiles, and the other products of numerous rural and urban workshops. The 1786 Anglo-French trade treaty increased the supply of manufactured goods at just the wrong moment. For much of the population, employment and earnings collapsed at the same time that the cost of living substantially increased. A miserably cold winter made the situation all the more difficult adding the problem of keeping warm to that of finding the wherewithal to purchase food. The book then describes this misery spreading to the ranks of the comfortably off, and the rest (French Revolution)is history.