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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (369)	2/20/2004 10:31:54 PM
From: mishedlo	Respond to of 116555

Slowest Real M2 Growth Since Late 1994 northerntrust.com

To: patron_anejo_por_favor who wrote (369)	2/20/2004 10:55:20 PM
From: mishedlo	Respond to of 116555

Gold bull or dollar bear? marketwatch.com

To: patron_anejo_por_favor who wrote (369)	2/21/2004 9:48:11 AM
From: Mike da bear	Read Replies (1) \| Respond to of 116555

<<McDonalds and Wendy's (burger worker's) etc to be reclassified as manufacturing jobs and voila new jobs will be created>> Oh my God, when I first saw this post I thought it was sarcasm. Now I'm reading that the administration is truly considering this... because fast food works assemble stuff (hamburgers) out of component parts (pickles, ketchup, roll). I think we're truly doomed as a country. It's now just a question of when does the end come. The government is just a complete sham now. The media (CNBC) might joke about this issue for a couple hours, but after that they'll happily report the turn around in manufacturing job losses and how jobs are being created. The sheeple will accept it, critical thinking is a vanishing trait amongst the American population.

To: patron_anejo_por_favor who wrote (369)	2/21/2004 12:00:20 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

What definition of stagflation are we using? Generally it means rising interest rates and a sluggish economy. Let's look at how Plunger on my board on the FOOL defined deflation. For deflation, MrP proposed using falling wages if I recall properly. No one before has proposed that definition that I am aware of but a decent case can be made for it. Inflation would be rising wages I guess. Is stagflation stagnant wages? Is it that simple? I am not so sure. I do not like the classic definition of inflation (increased money supply) because prices do not necessarily rise with the printing of money. Japan proved that for years, and we are proving it now on the prices of finished goods. Yet I think that MrP's definition is a bit too simplistic. That said, how does one change it to make it better? Let's for a second consider these: Inflation = increasing wages chasing too few goods relative to demand deflation = decreasing wages chasing too many goods relative to demand stagflation1 = increasing wages chasing too many goods relative to demand Stagflation2 = decreasing wages chasing too few goods relative to demand Stagflation3 = steady wages and steady demand somehow those stagflation possibilities seem silly but if it is not inflation or deflation then what else is there and I see those three possibilities. It would seem like stagflation1 is the nirvana the FED is looking for. Price pressure due to over capacity so prices stay low, wages for whatever reason stay high, and people can pay down debts. I doubt that anyone here thinks that is remotely possible now. However, is that exactly what happened in the late 90's with computers and computer programmers? Technology prices kept falling yet wages paid to the dotcommers kept going up. Add in the orgy of a nonsense Y2K scare and scarce resources (skilled computer programmers in high demand but the global infrastructure not yet in place for outsourcing programmers but increasingly in place outsourcing the manufactoring side). Unfortunately, instead of paying off debts in those good times, it seems we went deeper in debt at every level. Does that summ it up? What might cause stagflation#2? Is this scenario possible? Is this the reverse of hyperinflation(not that I want to define another term and so I wont!). Is Hyperinflation really Hyperdeflation? Rapidly rising prices and falling or stagnant wages? I guess if China becomes self sustaining and can pass on huge price increases due to robust internal demand and they no longer give two hoots about the US customer yet wages continue to drop due to outsourcing etc. This seems wierd as it would put extreme falling pressure on house prices I would think. Stagflation 3 sounds like nirvana and it might be for lenders but not debtors. With the debt levels we have here, lenders keep everyone on the hook for years, people never get out of debt but people keep making enough to get by and keep paying the interest to "the company store" or do I mean Capital One? This would seem to be a demographic thing with all the jobs outsourced that can be outsourced, wages stop falling, excess capacity is slowly worked off due to obsolesence or changing technologies coupled with increasing worldwide demand. We might indeed be headed here but the timeframe would seem to be very long and arduous and not every country would benefit equally. Obviously there is more pent up demand for goods in China than the US. Can we head into a deflationary spiral or inflationary spiral and China moves in a different direction? At any rate, the overriding factor to me is jobs and wages, and overcapacity situation. Right now and for "a considerable period" that I refuse to define, it would seem we have slowly falling wages and overcapacity (in light of enormous debt levels and wage pressures). I see nothing to reverse this trend here and now (but China is a kicker), so I will stick with it. The least likely outcome from where we are is what I labeled stagflation1. We just came from there. Odds are we do not go back for a while. Mish