To: Abner Hosmer who wrote (8312 ) 3/14/1998 7:40:00 AM From: Gabriela Neri Respond to
Those are tough quetions which , if there was an easy answer, we could easily be billionaires . Or, are you one already?. Cheap oil and food are not permanent. There are many things which could upset that applecart, the least of which is poltical turbulence in the middle east leading to supply disruption, weather, or increased demand. The Asian crisis will eventually pass, and it will pass while the press is writing as if it just started, like things always happen. Right now, Japan is the Billygoat and their economy is sinking towards recession. Do you know how long this has been going on. Most, not all, is already reflected in the markets. Such that, when they decide to finally bite the bullet, and they eventually will, just when things seem the worst and it makes front cover of Time, the markets will already be anticipating the recovery. Same with all the commodity prices. They are depressed and will go lower, but most of the bad news is in them. I have seen this all before, and Steve Roach is saying that , amoung other things, that all the good news, or certainly the majority of it, is in the market with regard to inflation and bond yields and the dollar. What the catalyst will be , who knows. But he believes in the Phillips curve, unlike a Kudlow, who rails against it, due to his bent as a politically motivated animal more than a detached and objective economist. I dont know the answers to your questions, but I suspect that the first place we will see it before it comes into the CPI is in the price of Gold. Obviously, we havent seen it yet, but I do think we have seen the bottom in gold, which might be saying that the timing of any hints at inflation may not be as far off as many think. This Asian crisis is front page right now, but what about European economic growth, China, and what if Japan actually gets its political house in order and does something substantive. There is going to be tremendous pressure placed upon them by the US and others. The Asian crisis hasnt crimped much of our economic growth yet, and I suspect it wont dent it much , as Roach has always maintained. Pricing power is a difficult question, and nobody knows how it will play out-just like nobody but a very small quiet minority foresaw the Asian Crisis before it was sitting on top of their head. But todays anxieties and preoccupations are tomorrows irrelevancies. That is to say that what catalyst will spark the inflationary spiral will most likely not be predicted by the majority. They will talk about it after it smacks them in their face. Roach at least paints a possible scenario for its emergence.
