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

To: gpowell who wrote (36333)	7/27/2005 1:08:57 AM
From: Mike Johnston	Read Replies (1) \| Respond to of 306849

BLS specifically changes the basket when consumption changes due to inflation. CPI should measure price inflation and not changes in consumer consumption due to price inflation. Just because consumption drops and price rises it doesn't follow that the price change caused the consumption change - the opposite could be true. You lost me here. Are you really saying that a drop in consumption could cause an increase in price as opposed to an increase in price causing a consumption drop ? i think you meant to say : "Just because consumption drops and price rises it doesn't follow that the price change caused the consumption change -they could be unrelated"

To: gpowell who wrote (36333)	7/27/2005 1:10:06 AM
From: Lhn5	Read Replies (2) \| Respond to of 306849

Classically a consumption drop would cause a price decrease, not increase, as there is relatively more supply available. However, if the lower consumption is quickly met by a decreased supply, prices could rise rapidly. There seem to be so many people ready to fight other people, but does anyone not agree that the very low interest rates of the past few years caused asset inflation and allowed excessive borrowing and consumption and that once asset inflation slows or reverses liquidity will dry up quickly, inflated asset prices will drop, and the econoy will slow precipitously? Despite the froth comment by Greenspan, I think the Fed will try to protect real estate prices at any cost from any disorderly accelerations.