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

To: bond_bubble who wrote (66557)	7/21/2006 8:21:27 AM
From: mishedlo	Respond to of 110194

My belief is that, if Japan had lowered interest rate to 0.1% in 1992, CPI, PPI would have been so high in Japan (and hence more layoffs) and Japanese treasuries would have been routed and Japan would have had 2002 Argentina experience. That would have been so painful and so Japan chose the path that they are on now. Your position is that, even if Japan had lowered interest rate to 0.1% in 1992, asset markets would not have reflated. I disagree with the timeline. I keep stressing CPI only to illustrate the fact that cost of production (say PPI) is higher than cost of selling (say CPI) and this causes more layoffs and hence Fed will chose to maintain higher rates. I agree with you about Japan. They simply walked the market down for years. If Bernanke tries a huge drop gold will soar and treasuries will get clobbered. I suspect he will be forced to walk it down too. The silliest thing about the CPI is OER. After home prices are crashing in places, the OER , the biggest part of the CPI is going up - "contributing to inflation - or so they say" What nonsense Housing was dramatically understated for years and now there is talk of eliminating OER. The CPI is brutally manipulated. Mish