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

To: Richard Gampell who wrote (39751)	8/25/2005 2:29:39 PM
From: dpl	Respond to of 110194

This is a good point.As long as the RE bubble is expanding then I don't see high oil prices as deflationary.If RE pops then oil will act as a huge tax.

To: Richard Gampell who wrote (39751)	8/25/2005 2:39:13 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

I guess some people are implicitly arguing that an oil-shock-induced credit-crunch is going to cause this quick and massive depreciation (and therefore be potentially deflationary), but otherwise it's simply not convincing to state that money spent on oil will be subtracted one-for-one from money spent elsewhere. -- Rich It will most likely be a housing shock but I suppose it could be oil. Perhaps it is just housing exhaustion. Each rate hike and each rise in inventory adds more stress to the leveraged buyers. The mentality that prices are going to rise forever and "we have to get in now" seems to be fading. Eventually sentiment will eventually be "we have to sell now before it's too late". That may take years to play out. As for "it's simply not convincing to state that money spent on oil will be subtracted one-for-one from money spent elsewhere.". I partially agree, but mostly disagree. At the high end, no one cares. The masses however do care and there are far more "masses" than there are people swimming in money. No one to date has been able to come up with a plausible scenario in which housing crashes and we end up with inflation or hyper-inflation. My viewpoints are here: The great "Flation" debate - What's coming and how to profit from It. globaleconomicanalysis.blogspot.com Mish