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To: John Vosilla who wrote (1607)	3/18/2008 7:32:01 AM
From: SouthFloridaGuy	Read Replies (2) \| Respond to of 1718

Look, I understand what you are saying. And yes, one can make an argument that we are and have been for the past few years in stagflation. But I'm not sure how it helps at this point in time and answers what the fundamentals point to as an end-game. I just don't see how bond yields fall from 5 to 1 when the bond market forsees inflation, which is part of the definition of 'stagflation'. I think we have HAD inflation which is been mostly a function of growth in the rest of the world. That growth for the world was good and healthy for some time (not so much for us) wasn't it? Excess Growth=Inflation is a classic Phillips Curve argument. Since prices of commodities and many goods are determined on a global basis, that produces a so-called stagflation for countries which are not growing as much but see prices rising. Now the rest of the world is slowing. A good chunk of financials in the US are insolvent. None of this is inflationary. In fact, it's highly deflationary, especially for the U.S. It goes back to the end-game. There is too much debt, there is more debt per GDP than before. Despite all the so-called inflation in this country, debt:gdp has RISEN. That means the end-game will be worse. Every additional percentage of leverage increases the sensitivity to interest rate moves and creates a lower maximum sustainable interest rate. As a real-estate investor I am sure you can appreciate that statement. I would also postulate that like every market move, the last 6 months in commodities are irrational and will be corrected violently. People have to stop being fixated with CPI, which has very little meaning to policy choices.