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

To: ild who wrote (42687)	9/30/2005 12:51:59 PM
From: ild	Respond to of 110194

Date: Fri Sep 30 2005 10:18 trotsky (P. Yorkie, 6:37) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "While initially these increased energy costs certainly show up as inflation I am pursuaded that what is happening over the longer term is a REALLOCATION of expenditure." as you may or may not recall, i've been saying this for the past two years or so. i.e., for once we certainly agree on something. however, you still employ imprecise definitions. i assume that by 'inflation' you mean a rise in the general level of prices as measured by PPI and CPI. however, this is NOT what inflation is. inflation is an increase in the money supply. the usually not uniform rise in prices that follows on its heels is a SYMPTOM of inflation. since e.g. the Fed has brought year-on-year broad money supply growth measures down to their lowest level in a decade, we can conclude the following: 1. the broad rise in commodity prices we have witnessed over the past few years is mostly a lagged effect of the vast monetary inflation that raged from 1995 - 2003. 2. since the monetary inflation has slowed down in the meantime, the longer term effect of e.g. the recent energy price increases should be a decrease in demand and prices for other goods. 3. what is building underneath all the widely professed inflation concerns is the next DEflation scare. 4. as soon as this becomes obvious, the printing press will be back at cranking out those cyber-digits at full speed. 5. since the overindebted private sector can't be reasonably expected to increase its liabilities even further, this will be achieved via monetization of government debt. 6. all of this has been tried before, and failed spectacularly every time. Date: Fri Sep 30 2005 10:01 trotsky (US data on income/spending/savings for August) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved now, these are real shockers, even though the spin machine is trying to spin them as outliers. savings rate at a fresh record low of minus 0.7%? income and spending also both fell, and note that these are pre-hurricane figures. one thing is absolutely certain, the consumer has rarely been as ill-equipped as now to weather an economic downturn. it is supremely ironic that just as many US households find themselves in this precarious position after years of profligate spending via the accumulation of the biggest debt-berg in mankind's history, bankruptcy laws are about to become truly onerous as well. it's no wonder US corporations have for the past two years steadfastly refused to invest their cash into anything besides share buybacks. they correctly perceive future potential returns as dismal, which incidentally is also the bond market's message.