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

To: mishedlo who wrote (6594)	5/18/2004 11:00:07 AM
From: FrozenZ	Respond to of 116555

The Fed knows deflation is endgame and will do everything in their power to prevent it. What's in their power? Printing and loaning money. Loaning money to the point of making it known that it will probably not have to be paid back. Hardly any American has ever turned down a loan. Housing deflation means loss of state tax base and is unthinkable. They'll print and loan money until the cows come home. Americans will borrow until then too. Never underestimate the cleverness and creativity of bankers in figuring out how to loan money, and never underestimate the willingness of Americans to borrow it. This can go on for several years yet.

To: mishedlo who wrote (6594)	5/18/2004 11:35:52 AM
From: valueminded	Read Replies (5) \| Respond to of 116555

Misheldo: I think you are hoping. I have heard this story for years now and believed it for quite a while. Bottom line is they will print money. Deflation is a virtually impossible endgame when consumers spend. Japan is completely different. They save. We don't. Also, difficult for them to inflate much more. Prices over there are already sky high relative to US - despite the exchange rate coming down. The deflation scenario has been touted on this and other threads for 5+ years now. I don't think it will come to pass as long as the fed will continue to print money - unfortunately, I think the alternative which will be a currency worth far less then it is now is not necessarily a good one. PS - I own a small business and would like to know what has gone down in price the last five years. Not my insurance, not my legal rates, not my accountant, not my raw materials. On a personal basis, not food, or taxes (on a relative basis), not energy, nor utilities, not real estate, not medical insurance, not college tuition etc. So I have a difficult time seeing deflation as likely. About the only area I see it is in communications and electronics - which is a small percentage of my monthly outlays anyway. If overcapacity is so rampant, why has the cost of business / living gone up so much ? If anything, I think it is the other way around.