To: geewiz who wrote (28896 ) 6/9/1998 11:50:00 AM From: Mike M2 Read Replies (3) | Respond to
Art, most people think of inflation as an increase in consumer or producer prices but economists of the Austrian school ( I'm a big fan!) inflation is an expansion of money and credit beyond the needs of economic activity. Depending on where the money & credit inflation other possible effects are trade deficits, rising asset prices or" maladjustments" ( Austrian term) in the pattern of demand and output. The preceding was from the Richebacher Letter 1217 St. Paul St. Baltimore, MD 21202- reproduction (in part) permitted if source noted. I have been a subscriber for some time now and I feel he has done an outstanding job of dispelling the lies,hype,myths and propaganda surrounding the bull mania. He recognized ,in advance, that SEA was " maladjusted" due to overinvestment and warned of trouble in his Sept. 96 and March 97 letters. Back to history- the greatest financial bubbles this century- U.S. 20's & Japan in the 80's occurred in an environemt of minimal inflation in the price of goods. Richebacher has argued that prices in the 20's would have fallen due to big gains in productivity but the monetary inflation kept prices stable. When, i have read about other manias Dutch Tulip mania, Missippi Scheme or South Sea bubble I saw no mention of consumer price inflation. Prior to the creation of the Federal Reserve inflation and deflation neutralized each other over the long term. te Since the Fed we have seen a steady erosion in the value of the dollar. Financial asset inflation does seem to spill into real estate in some regions. I have lived in Fairfield county ,CT all my life and I have never seen so many luxury homes( well over $1 M) being built. I do not follow real estate closely but it seems to me that prices are finally back or exceeded the 1987 peak. A home in my neighborhood sold for more than the asking price in only one week. I expect many for sale signs at lower prices when the long awaited bear does its damage. I spoke with someone who says they found a lender who will give them a loan(9%) to buy a house with no money down. Whatever happened to risk -g- Mike
