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

To: mishedlo who wrote (15677)	11/13/2004 6:21:15 PM
From: Elroy Jetson	Respond to of 116555

This is the problem created by "tax-cuts" paid for with debt - and an economy kept moving by a debt funded stock, bond and real estate bubble. Real Estate - The Deflationary Catalyst -- Fed Tightening Negative At Any Level A heavily indebted economy can only be maintained by a negative real cost of lending. Once the interest rate charged for loans becomes positive, the "money supply" (aka the total level of debt) stops accelerating and the de-leveraging process (aka bankruptcies) begins. The Fed and other associates have been skillful at hiding the fact that lending rates have been negative. 1.) Greenspan's suggested changes to the CPI lowered reported inflation while at the same time increasing the level of reported productivity - quite a clever fiddle. 2.) Pushing the U.S. Dollar into a steep decline allow wages and asset prices to decline substantially while appearing to remain stable. 3.) The pretense of rising asset prices have made people comfortable spending their life savings, by mistakenly assuming they have real gains in value. 4.) "Tax-cuts" let people think they have more money to spend, while these taxes are merely shifted to a decline in their currency, wages and asset values. In the end, Monetarism is nothing more than a magic act. The laws of physics and finance remain unchanged. .