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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (34559)	6/28/2005 11:38:40 AM
From: Wyätt Gwyön	Read Replies (4) \| Respond to of 306849

Do you want it both ways or only one? if only you could appreciate the irony of your statement. your entire deflation argument these past several years is based on the idea that when the inflation ends, it will be deflationary...therefore, we are already in deflation! IOW, you are counting your chickens before they are hatched. you think pie is already in your stomach because somebody threw some apple seeds on the ground. sure, current asset inflation sows the seeds of future asset deflation. but you ignore the extant inflation (just look at the current share of disposable income directed to housing) because you are forever banking on the deflation. so you double count the deflation (even during the inflationary phase). you also ignore the deus ex machina which has been a primary "enabler" of the current RE bubble--FCBs and Fed henchman artificially lowering interest rates. so, to answer your question for you (as i see it), you obviously want to have it one way (deflationary), but counting twice (deflation during the inflationary phase, and during the deflationary phase)! in my own case, i think there are several moving parts which you need to consider. one of those is that the artificially low cost of money is likely to rise even as home prices deflate (thus effecting [through its withdrawal] inflation in the deflationary phase, even as its current presence enables inflation in the inflationary phase), and a rising cost of money will be inflationary vis-a-vis all goods and services, to an extent which supercedes the impact of absolute price deflation in the current bubble asset class. in fact, a rising cost of money may be the initial cause of home deflation (at least initially). so in that case, you might be forced to admit to inflation in the future. so you will be twice wrong (your current wrong position and your future wrong position) and i will be twice right -g-. if you think about it, real wealth grows only with productivity growth. to grow productivity, we must cut down consumption and divert resources to productivity investment. since, instead, we have diverted savings to wasteful consumptive ends (housing bubble), we have not improved productivity at all. this is a lot worse than building more factories than we need, or laying too much fiber. so, in the future, we will be poorer as a society, with more debt, facing higher cost of money, with less productive capital stock. growing poorer w/r/t future goods and services is by definition inflationary.