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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (34499)	10/25/1998 4:31:00 AM
From: wily	Read Replies (1) \| Respond to of 132070

>> what entitles me to assume that consumer demand will rise enough to absorb all the additional production There was a guy named John Makin who was interviewed on NPR a few weeks ago and his theory went like this: The growth of industrial economies was supported by consumer demand, and consumer demand was supported by wages that represent at least a partial sharing in the profits of business. Exploitive and manipulative practices of international companies have created capacity in less-developed-countries, while not sharing locally in the wealth so produced. Thus, increased capacity is not paced by consumer demand--the workers don't make enough to buy the goods they are producing. Result: global overcapacity. The book being plugged was written in the eighties, and I've just started it: "The Global Debt Crisis" wily

To: Ilaine who wrote (34499)	10/25/1998 11:31:00 AM
From: Knighty Tin	Read Replies (3) \| Respond to of 132070

Coby, I totally agree about reading folks with whom you disagree. I find William F. Buckley's arguments stimulating and, very rarely, he can even make me change a position I hold. But the writer has to be bright and at least semi-honest. Reading a twit like Steve Forbes just irritates me no end. Ditto for market sages. I can get a lot from Barton Biggs or Leon Cooperman or Ray DeVoe even when I think they are out to lunch. But the intellectual dishonesty of an Abbey Jo or Joe Battipaglia leaves me cold even on the rare occasions I agree with them. The first Krugman argument about demand very poor. If production doubles, income does not double. Price goes down. If it declines less than 50%, then income increases, but it sure does not double. How an economist can ignore price is beyond me. He sounds like a chip analyst. Before the current crash, they had estimates of Micron Tech earning $17 in fiscal 1997. Why? Because they were becoming much more efficient producers. Last time I looked MU was not earning $17. Or even 17 cents. <G> The easy example is farm products. If twice as much corn and wheat are grown, are you going to double your purchases of cereal? If twice as many pc boxes are produced, are you going to build on to your house to store new purchases? <G> Nope. Unit demand may increase, but, dollar demand will either increase on a much flatter slope or even decrease. What the guy is saying is that if my income doubled, I would eat twice as many bowls of cereal and buy another couple of pcs. I may trade up from a Honda to an Acura, but I won't buy two cars, either. Using my always handy horse racing analogies, if purses are doubled at Churchhill Downs, Pat Day can still only ride one horse in any given race. Well, he could ride two at a time in a circus bit, but the odds of winning decrease immensely when the jockey does that. <G> I agree about Russia, though I think we have to use the adjective "organized" very loosely when we talk about anything Russian. As Karl Marx once said, When a Russian walks into a room, everything immediately turns into chaos. Part of that was normal German prejudice against anything Slavic, but part of it has a ring of truth. Money will flow out of US markets as long as AG continues his attack on the dollar by lowering interest rates. BTW, with our imports and trade deficit, we could see CPI rise because of the weaker dollar. The Asian components were not obsolete. They sold well over here. The problem was that the great growth engine, pcs, in dollar terms, stopped growing at 40% a year and now grow in the low single digits. Though unit demand is up, price is lower. Since there are no decent new apps, price is all boxmakers have to offer. And to get price, they have to pay low dollar for components. And they are. The Asians, and most American firms, and nearly all financial analysts, simply extrapolated a one time boom in box buying infinitely into the future. Dumb idea, but one I couldn't talk hardly anyone out of in early 1995. <G> This Clinton thing reminds me so much of Watergate that it is scary. Every time I hear, "it is just sex," I remember, "you do not impeach the most popular President in US history over some third rate burglary." I am sad that the Democrats are just as dishonest on Slinton's perjury as the Republicans were on Nixon's rigging of a US election. MB