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

To: orkrious who wrote (100617)	1/12/2009 8:48:22 PM
From: TH	Read Replies (1) \| Respond to of 110194

Ork, It is a great piece and agree completely with the economic principles. Still, there is one disconnect in what I believe the objective of the Fed is and this statement: <There is no reason to attempt to maintain artificially high house prices and to rescue the borrowers and lenders who were responsible for them.> There is a reason if you have an economy that cannot sustain itself without credit expansion, and housing appreciation being a cornerstone of that <game>. He talks of the willingness or ability to continue to pay for a house underwater, and I agree with that concept, but without a floor under housing millions of Americans will continue to the take the credit hit and walk away. The Fed must stop this, so part of their plan is ultimately to drive up inflation again and get another housing boom going. Thus there is the problem with his classic description of deflation as applied to the Blackhawk Ben model, and that is goods and wages will fall. Goods and wages can't fall if Ben is to put a floor under housing and restart the game, because money does not go where Ben wants it to go (assuming banks start lending again). Long term exactly what is described will happen, but near term I believe there is a completely different, and unsound, objective. Thus the <benefits> of deflation will be negated by excessive credit and <inflation by design>. I still don't know how the Fed gets wages up, for I see that as next to impossible with the unemployment rate and hollowing out of the real means of productions to other shores. Wait, I'm thinking realtors, construction workers, mortgage agents, and investment bankers <g> GT TH

To: orkrious who wrote (100617)	1/13/2009 12:08:02 AM
From: Box-By-The-Riviera™	Respond to of 110194

they cetainly are not deflation yet. big difference between a deflation and a liquidation. i totally agree with that. we have a liquidity crises now. we'll have the other good stuff later <g>

To: orkrious who wrote (100617)	1/13/2009 9:51:01 AM
From: Jack Hartmann	Respond to of 110194

FALLING PRICES ARE NOT DEFLATION The deflation in the 1930's resulted in massive unemployment. Great if you are employed.

To: orkrious who wrote (100617)	1/13/2009 1:05:05 PM
From: forceOfHabit	Read Replies (2) \| Respond to of 110194

I'm no economist (thank <insert causative agent of reality of your choice>), but this article makes little sense to me. (Which is to say, as much sense as any other piece of economic writing I've been subjected to.) It seems to me that in claiming falling prices are the cure for deflation the author completely neglects the economic feedback effects implicit in the phrase "deflationary spiral". e.g. Prices fall, so employers can only pay lower wages, so consumers have less to spend so prices fall further, so wages fall, so prices fall etc. I notice that when he talks about the inflation that will follow if the government does not withdraw the tidal wave of money it has unleashed he doesn't claim that rising prices are the cure for inflation. Why the asymmetry? Or maybe he does believe that. In which case, what about an inflationary spiral? I'm so confused. Which is always what happens when I think too hard about economics. I think I'll stick with trading - its simpler and more profitable. habit