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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 (65602)	7/8/2006 2:15:46 PM
From: bond_bubble	Respond to of 110194

No. You are assuming on/off switch. I'm suggesting path to transition will be gradual. This is also consistent with the PPI being higher than CPI theory that I explained earlier (the chicken feed costing more than egg selling price). Inspite of incoming money (CPI for companies and income for individuals) being less than the cost of making(PPI)/spending, why do people spend or companies continue to produce? This is where you are not analysing the depression deeper. For individuals, they must be selling their body, stealing, parasiting etc and HOPE that they will come out surviving fine. For companies, they must be selling corrupt products like mixing water into milk [imagine the competitive selling of brands to survive that will be unleashed and their scope of selling], with the HOPE that they will come out surviving fine. Until the "VALUES" are destroyed worthless, people will consume the income from selling "VALUES"/brand. Ofcourse, your theory of on/off switch works only if you consider income in the selling of the VALUES. i.e spending does not fall immediately, but selling of VALUES goes full ahead!! The rottenness in the culture will ACCELERATE from the financial sphere to the main street folks. In one of the link shades posted, a guy was writing about his life in depression. In the end, he says, he lived a moral life during depression however harsh the economy was. But if you read in the middle of the article, he says, he used to move grocery boxes and in the process eat some food (who knows he might have taken some for his family as well)!! Again, in the end, he says: " I've controlled my tears rolling into this writing - but then I cried my eyes out during the depression"!! Now, do you think this guy spent more than he earned? Ofcourse he did!! Even eating meals will be spending more than income earned!! But as per your calculation, No he did not. He was selling his values to make sure he was net positive on savings. You need to assume continuity in any transition. It is never on/off switch. Even the credit bust in the depression happened between 1931-early 1933. It did not happen in a month or 6 months. Just as credit inflation did not cause CPI inflation immediately (it has taken several years has it not?), credit deflation will not cause CPI deflation immediately as well (I think you agree with credit deflation, but not interested in CPI movement). There will be transition time and it will be more than few years when prices (commodities) start falling in US.