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

To: ild who wrote (13175)	5/4/2004 1:20:21 PM
From: orkrious	Read Replies (1) \| Respond to of 110194

Date: Tue May 04 2004 13:04 trotsky (frustrated, 12:20) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved note that in the short term, inflation actually seems to be picking up in the aggregate data. however, i would argue that this makes a deflationary long term outcome more likely as well - since when we look at the composition of this price inflation, it is as you say, largely a price inflation in 'necessities' - not only consumer, but also producer necessities ( raw materials ) . this squeezes the margins of producers, and lessens the amount of discretionary funds in the hands of consumers. thus items that have clearly suffered from price deflation pressures before are likely to continue to fall in price ( like your DVD or CD player for instance ) . initially, raw materials prices may well continue to increase however, on account of the central banks trying to stave off price deflation by printing more money. money naturally gavitates toward inflating assets, and even if one has residual fears about China's incremental demand, the fact remains that it will take years to bring fresh metals etc. supplies to the market - and speculators will anticipate fresh money being thrown at the deflation 'problem' and continue to buy commodities ( actually, price deflation should be an entitlement from the PoV of consumers, not a problem. in a true free market economy, aggregate prices of goods and services will tend to fall consistently over time, while the money supply stays relatively stable - increasing roughly by the 2% addition to the world's stock of gold per annum - prosperity then in terms of money will be manifested by the amount of goods that money can buy, not the digits on a computer print-out of one's account balance ) .