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

To: TobagoJack who wrote (32809)	5/19/2005 7:20:45 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 110194

The addition of China to the world market-place has caused, and will continue to cause dislocations. Many investments in industrialized nations are made worthless - destruction of capital and declining prices. New investments in China need resources and drive up asset and system-wide prices in China, as well as in input markets like commodities. Mal-investment in China destroys capital. If you build a factory ten years too soon, you have lost your money for ten years. This is capital destruction even if you rationalize it with peculiar cultural values. All of these factors would have occurred without excess creation of money and credit. They would have occurred if the world's economy used gold coins. Add excess creation of money and credit to the above situation and things only get worse: -- asset inflation and a false sense of prosperity in the US; -- worse asset and system-wide inflation in China, accompanied by uneconomic investment in excess-capacity. Inflation from the creation of credit and money can cause asset inflation and/or system-wide inflation, and there is little to recommend either. Confusing, the effects of excess creation of money and credit, with the effects of adding China to the world market-place - do not lead to understanding. .