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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 (67985)	8/10/2006 6:28:26 PM
From: bond_bubble	Respond to of 110194

You are only talking about the end scenario - that is credit deflation - and that credit deflation plays out over many years. I have no disagreement with that. You dont seem to be interested in the "trajectory" yet you seem to project a straight line as the trajectory i.e housing will go bust, then everything (like food price) will fall in price etc. I dont think you can extropolate linearly downward. It can be parabolic - i.e CPI inflation continues to rage inspite of housing bust and after the bust has brought back the "moral values", you see the prices falling. I believe that Bernanke understands this parabolic nature and hence he thinks that eventually inflation should die. Hence he has stopped hiking interest rates. I strongly feel that inflation has to raise faster for now. BTW, Japan's asset market fell hard by 1993. However, the CPI inflation turned negative ONLY in 1996!! How do you explain your theory of linear downward drift of CPI as applied to Japan? Was Japan an exception where CPI did not turn negative inspite of housing bust? By "moral Values" I mean, not creating credit for "parasitic" wall street at the cost of main street. If Social security, medicare are all going to be shored up by credit creation, then the parabolic CPI inflation does not have to fall below zero ever!