Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: benwood who wrote (94172)	5/12/2008 6:21:12 PM
From: philv	Read Replies (1) \| Respond to of 110194

I recall Greenspan musing that people don't really need wage increases as there was asset growth in housing. The asset bubble was a good and significant thing as far as the FED was concerned. They obviously recognized it as a plus for the economy, and did everything they could to encourage and inflate the bubble. When asked about the housing bubble, Greenspan would deny it, and when questioned about overseeing or drafting some rules in regards to hedge funds, he thought it a bad idea, and explained how important it was to "spread the risk". I'm sure many unsuspecting investors, throughout the world would take exception? LOL

To: benwood who wrote (94172)	5/12/2008 6:42:30 PM
From: GST	Read Replies (1) \| Respond to of 110194

Assets can be used as an investment to offset inflation -- a house is an example. You cannot live in a stock portfolio, and a car is rarely an investment. So people bought houses hoping to use this asset class both as a place to live and as a hedge against inflation after the dot.com hedge stopped working. But the housing hedge is no longer working -- that in no way means that inflation is not happening -- it only means that the classic housing hedge is failing badly. Inflation itself is now being driven by our status as a debtor nation -- and against that kind of inflation we are nearing the point of no return if we are not already past it. Where Mish goes so wrong is assuming that inflation is only a matter of money supply -- this of course is absurd as anybody who has eaten or bought a tank of gas lately will tell you. Inflation can be caused by monetary expansion beyond what the real economy can satisfy, but it is neither necessary nor sufficient as a complete understanding of inflation. As our national debts, our international debts and our personal debts eat us alive, we will simply not be able to convince enough people to swap their goods for paper -- our paper. Mish and others like him don't get it -- and they wave it off as not being real inflation because it is not part of a narrow-minded and circular monetary understanding of the phenomenon -- the definition that absurdly says that inflation is a rise in money supply caused by a rise in money supply (remember, they are saying that inflation has nothing to do with prices). The collapse of housing prices will not bring down the price of gas -- on the contrary, it will send it to the moon as the foundations of our economy -- debt backed by increasingly worthless assets -- crumble and break apart, leaving us with nothing of value to offer in trade for real goods in international markets.