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

To: Mike Johnston who wrote (53877)	2/15/2006 1:00:29 PM
From: GST	Read Replies (1) \| Respond to of 110194

<With stable money supply, prices not only do not rise, they actually go down, due to increases in productivity being passed along to the consumer.> Of course this is complete nonsense for many of the most important and basic things we depend on and buy. For example, as we deplete our oil reserves and as hundreds of millions of new consumers flood into the market for electricity and cars the price of oil has only one way to go and that is up even if money supply is held constant. Same for a broad range of commodities. Even more to the point, for positional goods the new competition for social scarcity will drive prices higher no matter what happens to money supply. The price of a stradivarius is not determined by money supply. It is determined by supply of the violin (you can't make a "new" one" and demand for the violin which increases as the number of bidders grows, independent of money supply. On the flip side, prices for computer chips can fall even if money supply grows due to productivity increases. The cost of labor for labor intensive production varies with supply and demand for labor and skills and is not generally a function of money supply. As for suggesting that I watch CNBC too much, perhaps you should stop looking in the mirror when drawing conclusions about others. I do not suggest that money supply is less than an important consideration -- but those who elevate it to the level of "it is the answer to everything" are at best an amusing subculture.