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

To: John Vosilla who wrote (64092)	6/19/2006 12:55:52 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 110194

>>The Dallas fed governor<< Wasn't he the same imbecile who said we were in the "8th inning" of Fed rate hikes about a year ago? Better off not listening to any of these clowns, put on some Uncle Tupelo or maybe some vintage Ry Cooder CD's instead......

To: John Vosilla who wrote (64092)	6/19/2006 1:10:42 PM
From: gregor_us	Read Replies (1) \| Respond to of 110194

The FED are inclined to respond just like their counterparts at the BOJ. The BOJ saw that the embolism created by their preparations to tighten went through the whole bloodstream, from Sao Paolo, To Syndey, to London--and then wound up right back on their own Nikkei, which got consecutive dingers for 100's of points. imo the FED is of course conducting a fraudulent fight against inflation anyway, because only a resolve to get control over the deficit spending gets a handle on these problems. The Bond Market, the Job Market, the forex market, the Housing Market, and the Stock Market have already given their respective signals to the FED to knock it off. We just got another signal from housing just 10 minutes ago. Meanwhile the USD and T-Bonds continue to tell the USA not to fight inflation by rasing interest rates, in the first instance, but rather to get the spending under control. That's the primary message. Best, LP

To: John Vosilla who wrote (64092)	6/19/2006 2:54:22 PM
From: shades	Respond to of 110194

No need to worry for Sue Herrara's one year old baby as the 19 board members are looking at the long term and what her child will be able to purchase with a dollar when he/she is 21 years old. BWAHAHA - HAHA! BWAHAHA! I shot milk out my nose when I heard him say that Vosilla! The limit of his planning is probably how he is gonna afford his hooker next weekend like that time/warner CEO who just got busted - 19 years from now? Are you KIDDING ME? Unbelievable. No one in our society thinks in that time frame - we are not socialized to think that long. Gartman is on saying agriculture going up and other commodoties going down. Anyways another old article on good versus bad deflation relating to germany: theglobalist.com Consumer benefits? The companies suffering most from sinking prices are banks, mainly because collateral for loans is gradually becoming worth less and less. In addition, unemployment and public debt levels have been increasing. How does good deflation work? The theoretical model is very simple: Corporate productivity gains are not distributed to employees through wage increases. Instead, price decreases are passed on to consumers. Everyone profits from this, even those not actively involved in production. (Right - we have non productive baby boomers that are going to be very good voters - wages are not going up) The path to good deflation For good deflation to work, what counts is that people have confidence in the future. In short, that they consume and invest according to their needs — and not according to their price expectations. People buy computers because they need them, despite the fact that they will be less expensive in the future. (I doubt I will buy a new computer for a long time - more CPU power doesnt make me read SI any faster) For Germany, the danger is not whether it may fall into deflation — but that it will be a good deflation and not a bad one. A second prerequisite is that there are no strong unions insisting on productivity gains for employees. (bush has just sidestepped jimmy hoffa and friends with NASCO nafta superhighway eh?) And finally, debtors must hedge against falling prices, for instance through lower interest rates — just as creditors ask for higher interest rates in an inflationary environment. The beginning of a crisis As an example of bad deflation, we all remember the world economic crisis at the beginning of the 1930s. At that time, prices fell not because of productivity improvements — but because of lack of demand, triggered by the stock market crash. Reluctant buyers The consequence of lower prices was not that more money was spent, but that people were concerned about the future — and thus were reluctant to consume and invest. (inflation EXPECTATIONS have the fed shake in thier boots) There have been entire economies which have lived extremely well with sinking price levels over extended periods. This, in turn, led to further falling prices, which made the general economic situation worse yet. Recession turned into depression. What is “bad” about bad deflation is therefore not the decline in prices as such — but its consequences. What people fear is a cumulative process of too little demand, falling prices and again even less demand. To diagnose bad deflation, we must look not just at prices — but take economic conditions in their entirety. Bye bye consumerism We have bad deflation when people are uncertain about the future, are afraid of losing their jobs, when government becomes over-indebted — and when people fear higher taxes. (check, check, check, and CHECK) Then, they drive their cars one year longer and postpone a holiday because they have to save (saving out of fear) and/or hope prices will fall. Deflation began in Japan at the end of the 1990s when the government raised the value added tax (VAT) to counter huge increases in the country's public debt. Japanese taxpayers in turn reacted by reducing consumption. (check I believe this will be the fix in the USA - when taxes go up consumption will go down) Conclusions So what to make of all of this? 1. Do not fear deflation as such. It is only a symptom. Let us do something about the depressed mood, so that if price levels sink this will not lead to a downward spiral. In short, the specter of deflation is one more argument in favor of reform. (watch more american idol and turn that frown upside down vosilla) Good deflation is very simple: Corporate productivity gains are not distributed to employees through wage increases. Rather, price decreases are passed on to consumers. 2. If we should happen to live in a world without inflation in future (and there are indications that this is possible), there will always be a year here and there with lower prices. It is then all the more important that investors and consumers remain positive and do not give way to a pessimistic view. In a world without inflation — as positive as it would be per se — the danger of recession would increase. 3. When prices fall, creditors mostly profit — and debtors mostly suffer. Banks must take steps in good times to hedge against falling prices. The German example In the case of Germany, inflation has fallen below 1%— coming very close to the technical definition of deflation. But at present, it is still the good form of deflation — because there are no signs that Germans are holding back demand because of price expectations. Price expectations on the contrary still point upwards. For Germany, the danger is not whether it may fall into deflation — but that it will be a good deflation and not a bad one.