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

To: GST who wrote (75618)	12/14/2006 11:30:07 AM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

'Viewing the world myopically from the perspective of just one factor, money supply, will lead you to completely misguided conclusions in my view' So true. On the flip side of myopic thinking if you asked 6-12 months ago just about anybody who did well with their real estate in recent years they would have told you it was their brilliance or they lived in a 'special place', 'special community' or 'special town'

To: GST who wrote (75618)	12/14/2006 5:44:13 PM
From: basho	Read Replies (1) \| Respond to of 110194

Thanks, GST, but you're not actually responding to the point I was trying to make. I said: Of course a host of other factors, both psychological and real, affect prices of all kinds but without the pernicious effects of fiat "inflation", the net effect over time would be minor. Relative prices are a very different thing to overall price levels. Of course hundreds of millions of new participants in the global economy will have a major effect but let's not forget they are producers as well as consumers. It's not like a wall of fresh demand is hitting static supply. Prices will initially soar in areas of net demand (eg commodities) and sink them in areas of net supply (eg most manufactured goods). Then, at some later point, a different relative price dynamic will unfold as supply and demand constantly adjusts. The overall price effect, however, in the absence of persistent fiat inflation, would be negligible. Indeed, the experience of the 19th century -- which, like our time, was one of rapid growth, innovation and globalisation -- was that prices overall were stable to lower. Which is exactly what you would expect as productivity grows. By the way, when I speak of persistent fiat inflation this is in my view at least as much a private sector phenomenon as a CB one. Unfortunately, financial sector deregulation over the last 20-30 years was not accompanied by the removal of implicit and explicit official support and hence the natural factors which -- together with the gold standard -- constrained credit expansion in the past have been rendered ineffective. In short, moral hazard dominates the financial system worldwide. As best I can judge, many if not most of the factors you mention as being of at least equal importance to any monetary influences are in themselves to a significant degree a product of this ubiquitous, distorted and destructive financial architecture. Anyway, enough from me. I'm not sure I can put my viewpoint any more clearly. If none of it makes any sense to you, I'm happy to take early retirement from this topic.