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

To: basho who wrote (88607)	11/7/2007 11:40:49 AM
From: John Vosilla	Respond to of 110194

'As for the great 'flation debate, should such a scenario unfold, I'd guess that asset prices would severely deflate, in rough proportion to the gearing in each asset market. Prices on everyday goods might well go the other way, however, much as happened in many countries during the Asian crisis in 97-98 when their currencies collapsed.' We are well into the housing crash cycle..in many places we are off 40-50% already.. It was much worse overall in the early 90's when our financial system was insolvent, commercial RE crashed nationwide 70% on average with select residential markets in a freefall from Houston to NYC to LA, the US wasn't the big creditor and fiscally irresponsible nation it is today, the government (re the RTC) was in essence the lender of last resort still standing and the biggest holder of property, Greenspan was still an inflation hawk keeping rates too high (still fighting 70's stagflation) even though we were in a period of severe disinflation, the second largest economy Japan was in the early stages of it's decade long depression and all commodities were in a severe disinflationary spiral. Yet we never had deflation in this country the whole time even with all that.. You need to read Ravi Batra's "Depression of 1990' a great book..

To: basho who wrote (88607)	11/7/2007 1:41:02 PM
From: GST	Respond to of 110194

Thanks -- and the reference to the collapse of Asian currencies not so long is germane to my way of thinking as well. Plummeting asset prices and a currency in free fall do often go hand in hand -- and when they fall together in a country that is enormously dependent on "imported everything" the odds of deflation are miniscule, even if the middle class of the country is being wiped out in the process. The idea that prices fall as demand falls is only consistent with how things unfold in a closed economy, or an open economy with a high savings rate and a big current account surplus -- and we are neither.