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

To: mishedlo who wrote (4055)	4/10/2004 5:31:57 PM
From: yard_man	Respond to of 116555

I think the cause and effect are backwards -- economic background provides the backdrop necessary to get the populace to accept something like Bush's silly war. I had a fellow tell me near the bottom -- war would be good if it brought the naz back -- he was speaking tongue-in-cheek, but I think a lot of folks thought -- ah here's some fiscal stimulus. The way 9/11 has been used to expand government spending instead of really taking the time to address the policy problems -- it's contemptible in my book. The worst kind of political opportunism. I think this cycle is different -- when the war becomes less of a fiscal stimulant and more of a drag (starting about now?) -- watch out, IMO.

To: mishedlo who wrote (4055)	4/10/2004 8:12:09 PM
From: Elroy Jetson	Respond to of 116555

My comments on the list you posted. Modern day Kondratieff - Where are we in this cycle? 1. War uses up productive capital and destroys asset values by huge uncertainty as to future property rights. 2. Immediately post war because of the low assets base savings are in huge demand for rebuilding and capex. The war portion of this listing are very applicable to Iraq, but terrorism has not yet reached the point of affecting valuations in America and other nations 3. Rapid stable economic growth tending to inflation as all productive capacity is used. 4. As stability returns and is extrapolated p/es and asset values are elevated. 5. As assets rise so a small sharp capitalist-system operator class gradually amasses a larger and larger proportion of the asset base. 6. Their wealth allows them to buy control over the system. 7. But their intent is to get wealthy and they don't spend their wealth. 8. The most lucrative businesses are all about shuffling assets not creating new wealth. In the long run, all businesses should earn the same return (capital rents), with the exception of monopolies. Monopolies can be created by government grant, patent or copyright, or market position (either brand name or anti-competetive practices). "Businesses" involving Transfer of Assets are, from an economics point of view, more properly an investment function rather than a business, all examples of buying low and selling high. 9. Excess of savings over productive use for them leads to a depressionary spiral. A strong preference toward savings has never led to a depression or a "depressionary spiral" whatever that is. A sudden shift away from consumption toward saving can reduce returns on capital in the short-run. Uneconomic investment destroys capital making the society less wealthy. The awareness of this loss of capital often occurs some time after the actual loss. A recent period of awareness began in March 2000. The cause of depressions is included later in the list of items you posted. 10. As hope turns to despair turns to either anger or desperation ... return to (1). Where are we now? ALL depressions are caused by less spending than productive capacity, and the main cause is excessive concentration of wealth. This is the truest statement listed. Wealth and income is more concentrated now than at any time since 1929 and has exceeded 1929. In the Middle Ages wealth in a city-state became concentrated in a few hands leading to depressed economic conditions. When that city-state was over-run by an invading army, prosperity returned as buried coins were returned to circulation and land ownership was redistributed. Lending and banking systems extends this cycle allowing spending to continue long after wealth has become concentrated. Even with diminishing interest rates, debt service eventually reduces available aggregate demand.