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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 (53374)	2/10/2006 10:52:53 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

Deflation in housing does NOT equal general deflation whether defined as a drop in the CPI or a decline in money and credit outstanding. It would require a HUGE drop in housing prices to trigger general deflation. Very unlikely IMHO.

To: mishedlo who wrote (53374)	2/15/2006 5:41:59 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 110194

if you want to call housing inflation on the way up, you will have to call it deflation on the way down Jim Grant used to call the 90s stock bull market (which he totally missed, btw) asset inflation. i guess that's the sour grapes way of looking at it. it's also a squirrely way of saying that all the supposedly inflationary liquidity pumping "went somewhere" in the midst of disinflation, when your mainline goldbug argument falls flat on its face throughout the 1990s. my thinking is that housing and other bubbles are not inflationary in the "traditional sense", at least directly. by traditional, i mean a sustainable sort of price spiral. instead, we just have a bubble that eventually pops and goes down. one obvious difference between a bubble and "traditional" inflation is that most people LOVE a bubble and most people HATE inflation. however, you can say, at least, that the housing bubble was "traditionally inflationary" at the margin in that it increased demand for all sorts of goods (thereby inflating their prices) beyond the long-term (sustainable) trend demand. likewise, we would expect a popping of this bubble to have a deflationary impact on those demanded goods (commodities), even if we ignore the housing prices themselves as either being inflationary or deflationary (since, obviously, the monthly payment made by J6P did not rise nearly as much as the housing price due to lower yields, and reliance on practices i expect will be illegalized or marginalized in the future, namely widespread I/O, option ARMs, ARMs in general, yada yada). so, i think the housing bubble is marginally inflationary, and its popping should be marginally deflationary. i was very intrigued by Elroy's comment about China supposedly having 10-15 years capacity of factories, housing, etc. if that is true, then we could have a synchronized deflationary tsunami from the China contraction and the US contraction. i'm not knowledgeable enough on China to know if what EJ is saying is true. hmmm, a global depression--how could you have it without both the US and China being the main parties?--that would be a very interesting investing environment.