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

To: Wyätt Gwyön who wrote (34565)	6/28/2005 11:45:25 AM
From: John Vosilla	Respond to of 306849

I think it comes down to whether you want to believe the deflationary forces of low cost labor in China are greater than the inflationary forces such as asset appreciation, skyrocketing commodities, continued growth in credit and the monetary base, population growth versus finite natural resources ect...

To: Wyätt Gwyön who wrote (34565)	6/28/2005 2:54:13 PM
From: Mike Johnston	Read Replies (2) \| Respond to of 306849

Under current system, deflation is not possible, since the Fed has the capacity to create unlimited amounts of new money. And indeed that what has been happening on a big scale since 1995. And not only the Fed can print money, they have no limits on injecting that money wherever they wish, either through creation of credit or even destruction of credit ( technically destruction of credit is deflationary if it is liquidated through paying it back or defaulting, however Fed can actually increase money supply through destruction of credit if for example they buy and then liquidate either government or private obligations in bailouts) Gains in productivity which lead to increased production efficiencies and lower prices should not be confused with deflation. In my opinion, deflation will happen only after the Fed is no longer able to print money at will, and that can only happen when the dollar collapses at some point in the future.

To: Wyätt Gwyön who wrote (34565)	6/28/2005 9:09:23 PM
From: mishedlo	Respond to of 306849

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! Once again, purposely or not, you grossly misstate my position. globaleconomicanalysis.blogspot.com #5a "Deflationists believe the CPI numbers". This is patently false, at least as a universal statement. Perhaps some do, then again perhaps some inflationists that believe in a strict definition of money do believe in the CPI. Once again the question arises, are we debating prices or are we debating the fact that "Inflation is always and everywhere a monetary phenomenon". I am willing to assume and am waiting Jim's reply that he agrees that inflation is a "monetary phenomenon". The question then is, how does that phenomenon manifest itself? For the record I think that the CPI is grossly understated yet I am a firm believer that deflation is 100% inevitable. Is this a conundrum? No not really. For example, right now is there much doubt that we are in stagflation? The problem is that is yet another term that we need to define. Generally the term means rising interest rates and stagnant growth. Unfortunately that definition has nothing at all to do with either inflation or deflation, both of which pertain to rising or falling growth in money supply as discussed above. Thus we could be in stagflation and deflation at the same time or stagflation and inflation at the same time. IMO the term "stagflation" is just a cop out used broadly whenever the stock market is not advancing but interest rates are. Finally we have disinflation which is the slowdown in the rate of inflation or the downward movement of prices in general. Sheeesh! Neither disinflation nor stagflation are monetary phenomenon but both are discussed hand in hand with inflation and deflation that at least in my viewpoint are! Is it any wonder people are confused? All these terms and all these viewpoints, most of which are not correctly applied by the masses sure lends credence to the idea that "There is a whole lot of 'flation' going around"! As for the CPI, there is zero doubt, at least in this long term deflationist's viewpoint that prices are currently understated especially when it comes to housing and energy costs. This too will be the subject of a future blog as once again the answer is not as simple and straight forwards as inflation alarmists believe. That said, right now the CPI has probably vastly understated the rate of inflation, and in general I think I would think that Jim Puplava and I are more or less in agreement on this fact. Hopefully the above discussion lends credence to my assertion that deflationists are not the only ones who are confused and that deflationists are not the only ones who do not know what money is and that deflationists in general believe in the CPI. The big question, however, is not hindsight but foresight. Where do we go from here? ============================================================= There: are you happy now? BTW I addeed the bolding above just now because it is exactly what we are arguing about. The CPI is grossly distorted by all kinds of things. I agree that it distorts housing prices as well just as I said. However I believe what you want to do is a gross distortion in the opposite direction over stating inflation. Finally I prefer my investment decisions to look ahead: what WILL happen. I really do not give a damn what inflation was two years ago, three years ago, or even last year! Take a good hard look at what Bill Gross, Steve Roach, and Don Coxe are saying. One by one by one they all seem to be coming around to my point of view. Gross even agrees with me that rising oil prices are NOT inflationary. If you think inflation is coming then prove it. Short some 10 yr treasuries in size and hold them for 3 years. Buy a condo in Florida, that should work too. Mish