Date: Fri Feb 13 2004 12:36
trotsky (frustrated, 11:10) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the difference is this: in 1949, the K-winter that began in 1929 ended - the reflationary K-spring phase began. this in turn ended in the late 60's and was replaced by the inflationary K-summer - interest rates, which had been in a mild up trend since '49, suddenly accelerated. capacity utilization was high, as the overcapacities dating from the 1920's boom had been liquidated, become obsolete, or their slack had been taken up respectively. consequently, when the Fed tried to monetize commodity price rises ( esp. oil ) and the ballooning deficit in the course of the 70's, labor and businesses both had pricing power and demanded recompense for the monetary inflation. the vastly acelerating inflation of the money supply thus coincided with an equally accelerating wage/price spiral. the economy's overall idebtedness, especially private sector debt, was still VERY small, both in absolute terms and relative to GDP. thus, when the Fed goosed the money supply, there were plenty of willing borrowers helping to 'create' more money. they couldn't lose after all, since it was obvious that inflation raged.
and that is why, in the early 80's recessions, high rates still prevailed - the afterglow of the K-summer, which had ended with the rates and gold peaks in 1980.
today is of course vastly different, as evidenced by the persistent decline in interest rates since 1980, throughout the disinflationary 'autumn' period ( 1980 - 2000, roughly ) with its attendant huge increase in paper asset values and technology and productivity boom. also, private sector debt sits at unprecedented heights, and industrial overcapacities are frighteningly large - both typical 'winter' phenomena. the similarities to the previous autumn/winter sequence in the 1920's and 1930's are downright eerie in fact, the main difference seems to be that the cycle has acquired a longer duration, and the sub cycles likewise are longer in duration ( possibly connected to longer life expectancy? ) . note that Japan's K-cycle has been traditionally removed by about one decade ( i.e. it's one decade early ) , and it seems that even that cycle has actually a different ( slightly faster ) duration frequency in its sub cycles.
Date: Fri Feb 13 2004 12:02
trotsky (re. gold contract) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
shortly before today's turn in the dollar began, a fund ( i presume ) sold a big gold futures long position , about 8 minutes after the high was put in. this was one of the biggest sell orders in quite some time. later, stops were apparently triggered below 410, as selling volume picked up sharply again when that was breached.
Date: Fri Feb 13 2004 11:20
trotsky (@dollar) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
if one looks over the currency contract CoTs, the speculators are all heavily long non-USD currencies ( and by implication, short the dollar ) . it's actually not all that surprising to see a short covering reversal begin with what is ostensibly 'bad news'. in fact, it almost always happens this way, and indicates that the news were already priced in. it's also a warning that the reversal may be a meaningful one, leading to a bigger correction.
Date: Fri Feb 13 2004 11:16
trotsky (Bizarro@Japan) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
as i said yesterday, the sheer size of Japan's interventions proves that a monetary crisis is ALREADY underway. it doesn't matter that no-one admits it, or even talks about it much. in the early 70's, the collapse of Bretton Woods started out in exactly the same manner...foreign CBs desperately trying to prop up the dollar, with an indifferent US administration looking on.
Date: Fri Feb 13 2004 11:06
trotsky (@Richebaecher) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
not only is there no 'pent-up demand' on the part of the consumer, but the consumer is highly likely to retrench in coming quarters. and as i've said before, the consumer recession will very likely be FAR WORSE than the tech bubble collapse recession that preceded it.
this is also why, in spite of the falling dollar, the outcome will very likely be deflationary. for instance, one of the major manifestations of the previous monetary inflation was the housing bubble. this is set to reverse dramatically, in spite of the continued downtrend in interest rates. the situation with housing is eerily reminiscent of Japan's predicament a few years after the stock market bubble had peaked - only US housing has - thus far - held up a while longer, mostly because the interventionist stimulus measures have been more forceful than Japan's had been initially.
however, once certain thresholds are reached in private sector indebtedness, combined with a merciless uptrend in personal bankruptcies, it won't matter anymore what rates are doing - and developers will probably be up to their eyeballs in inventory when the lights are switched off in that market, so there will be huge pressure on prices at the margin. |
