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

To: mishedlo who wrote (12237)	4/20/2004 8:33:21 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

<How can there be pricing power unless wages keep up?> For the umpteenth time, there is pricing power because there is too much money chasing too few goods. This is in turn perpetuated by two factors: 1. Tremendous, unprecedented ability to borrow at rates well below the real inflation rates. This has little to do with "wages". In the last two years new consumer borrowing has outstripped wage gains 7.4 to 1. 2. A maladjusted economy that hyperstimulates consumption, at the expense of productive activities and goods in short supply. Constant manipulation never let's economies get into equilibrium, as the wrong areas are always being goosed. Some of the dangerous fallacies of composition in your (and the Wizards) world view; 1. Wage and labor determines inflation levels. Incorrect: easy borrowing that's used for consumption (as opposed to production/actual investment) is the heroin of inflation. 2. There is excess capacity, or an output gap. Incorrect again, so called excess capacity is easily wrecked when it's A: just flat out obsolete B: can't get cheap input goods, C: the supply chain breaks down, D: if it's operating costs are excessive/unprofitable.