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

To: mishedlo who wrote (47749)	12/20/2005 2:35:37 AM
From: John Vosilla	Respond to of 110194

Nice blog Mish. Still not seeing it in the charts though which should be leading this next downturn by a couple of quarters. You look at C,BAC,JPM,COF all are right at breakout territory. Gold broke out already. The next couple of months could be telling. Stagflation or depression? The jury is still out. Using the KISS method if major banks stay range bound and gold powers higher we are in stagflation with minor ramifications from bursting the RE bubble. If major banks breakdown and gold continues up real bad times and big spike in rates on the horizon. If banks breakout we are in a new bull market for the world economy and reflation is a success regardless of what gold does.. Now if banks breakdown and gold collapses deflation on the horizon.. Your thoughts on TA signals?

To: mishedlo who wrote (47749)	12/20/2005 11:07:58 AM
From: GST	Read Replies (2) \| Respond to of 110194

You make flaky assumptions -- i.e. productivity is deflationary and CBs fear deflation because borrowers cannot pay back loans if their wages are going down. This is silly. If productivity goes up this enhances wage earning potential rather that depressing it.

To: mishedlo who wrote (47749)	12/20/2005 12:22:02 PM
From: gpowell	Respond to of 110194

Those things were not explained simply because they can not be explained. Why should inflation be targeted at 2% and not 1% or 3%? In low inflation environments, it is expected that inflation will fluctuate enough such that there will be periods when the yield on cash and bonds are equivalent, which, in turn, renders traditional stimulative monetary policy ineffective. It has been calculated that an inflation target of 1% or greater would make the preceding scenario unlikely. Now add the fact of CPI measurement upward bias, which is roughly 1% and you arrive at a lower bound target of 2% for CPI inflation. Why should any inflation be targeted at all? Why favor a positive rate of inflation? Because wages are inflexible downwards, thus a small amount of wage inflation may facilitate the adjustment of real wages to changes in the labor market. (And the labor market adjustment sets an uppper bound on the target for CPI inflation.) See “money illusion” Even if it was for some reason smart to target prices, can prices really be measured it accurately? Yes. What do central banks do to overcome lag effects of monetary tightening and loosening? Nothing. If economic agents adjusted instantaneously there would no effect on output and employment from monetary policy.