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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 (75567)	12/13/2006 7:27:16 PM
From: bond_bubble	Respond to of 110194

And if you dont believe in PPI vs CPI theory that I've been saying so long and the one explained well by Hayek (the multistages of production and money non-neutrality - in my previous post), look at the below article: (NOTE: This Sean Corrigan calls himself an Austrian Economist and he fails to see the Hayek's multistage production theory. But instead he seems to be absorbed in Milton Friedman's single stage production theory that states, for a price any goods will be unearthed!! Sean seems to be confused that in single stage production, commodities are difficult to be harvested!!) lewrockwell.com Hayek in the previous post article gives three reasons why higher orders goods will not be produced. All the three reasons are well illustrated in the Sean's article, although, Sean is not able to identify them with Hayek!!! This is what Mises termed as mis-pricing. For any price, you dont get any (physical) goods!! This is what is depression/deflation and the one Shades has been trying hard to explain!! Also, notice that Hayek says there was commodity inflation up until 1927 and since the consumption was allowed further, higher order goods had shortages. I believe shortages/high prices are going to show up soon. Lot of people believe that US manufacturing shrinking is not at all important as US is a service economy. As an example, utilities are considered manufacturing in US. If less electricity is produced (because 5.25 % interest rate is too high for Utility to build plants) and more malls are built (because 5.25% is too low to prevent consumption or low order goods industry growth) - there should be high prices for electricity etc. This I believe is the essence of credit deflation and that is why Fed will chose credit deflation rather than allow inflation (consumption) to eat up the remaining higher order goods (defaults on electric bills would be killing the utilities right?). I've stated earlier, slow down in higher order goods (like manufacturing) is a precursor to recession. Even Hayek alludes to that in the previous article. Currently, manufacturing is contracting in US, slowing down in China, Japan and India. Now, we should expect inflation and recession as per Hayek. This was true in 2000 as well. Inflation soared right through that recession.