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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 (75821)	12/16/2006 3:04:30 PM
From: kris b	Respond to of 110194

Gee why don't we just keep expanding money forever, thereby perpetually holding inflation low? and keep the economy going until eternity.

To: mishedlo who wrote (75821)	12/16/2006 5:19:02 PM
From: pogohere	Read Replies (1) \| Respond to of 110194

It seems pretty clear that imports have kept prices of goods lower than they would have been. I think it's fair to call this disinflation. The Chinese have been expanding credit in China for the purpose of building productive enterprises. With their low labor costs, we have a disinflation in the price of their exports. How long this continues is debatable. The question then becomes what we use as a measure of inflation understood as a rise in prices. If we effectively leave out the stock markets and housing prices when we measure inflation as price rises, and we play games with bs like hedonic valuations, we miss the effect of the expansion of liquidity and credit. The official figures on CPI do just that: they don't measure the real universe of prices, mismeasure productivity and give false readings of inflation.

To: mishedlo who wrote (75821)	12/16/2006 5:57:12 PM
From: GST	Respond to of 110194

<Now we see a GST theory that says expansion of money causes low inflation> That is absolutely correct -- globalization and the booming growth of money supply that has attended this trend have been largely responsible for low inflation in the US (lower than would otherwise be expected). The reason for not continuing this is obvious -- to most of us anyway. Running a current account deficit as we have works best as a short run approach -- it is similar to hiding something by throwing it up in the air. It is a highly effective solution in the short term. The purpose of the globalization process has been to bring China and others into our world trading system. This is part foreign policy and part economics. If we had bombed Vietnam with cases of pepsi it would have been more effective as a foreign policy. You don't have to look too far to see the consequences of isolationism -- just look at North Korea. Our problem now is how to change gears towards lower US growth without sending inflation into the stratosphere.