Nicely said...And you brought up an often overlooked phenomenon of a sort of "sector" inflation vs deflation scenario, which is one that few people have mentioned (or at least I have not read about anywhere else)...And thats just what the talking heads want...They want to focus on only the aspects of the economy that are deflating and will never, ever talk about the enormous inflationary pressures in healtcare costs, housing costs, and the other necessities of life...Like you said, televisions, computers, vacuum cleaners, etc will deflate along with automobiles, perhaps...but the things everyone absolutely needs are soaring at a rate that is unprecedented...When, if ever, do we hear about how ridiculous insurance costs have become since insurance companies can no longer earn a rate of return high enough to payoff their claims... Also, very interesting speculation on the masses revolting if/when they are upside down in their mortgages...And then they will find the political party to do the work for them...I think that you have outlined the most probable future course of events in this country in the next 5-10 years
Actually we produce a product that the whole world wants - its called the US dollar. Because all of the other countries have an interest in propping up the dollar so that their exports are competitive - the US can basically print dollars at will. Its not a bad deal. We give them pieces of paper and they give us cars, machinery etc. Because of this lopsided demand for the dollar, I think equilibrium for the US is not a balanced budget, but a large deficit.
Yes, the US Dollar is an anomaly in the world of Fiat money. Looks like our charm is wearing off though.
agreed - excellent posts. from a longterm macro-level investment perspective, besides gold.... anyone care to share their thoughts?
Take out terrorism and the impending conflict in Iraq, and anticipatory oil prices, and gold takes a big dumpy. The price of gold is not about inflation in the way it was about inflation in the late 70's and 80's. The dollar could slide another 20%, and gold could hit $400.00, however that really isn't too much to get excited about..... and unlike the 70's and 80's we have potential worldwide deflationary pressures as well.
http://209.41.12.102/cgi-local/shoptmc.pl/SID=031874365/page=0401tice.html "The consumer and the whole economy are living beyond their means and need to retrench. Retrenchment means economic recessions, though, because you have to increase the savings rate and spend less. However, our economy is built on always spending more. Therefore, the cure changes the whole dynamic of the economy and they donât want to do that. So I think that eventually their only solution is dropping money from helicopters... "
Related article : http://www.nationalpost.com/search/site/story.asp?id=8BAE7EB6-52F0-4529-B7EC-AFED66FB02C7
Thanks for bringing this thread back to life Babak. It's too interesting a topic to face such an early demise. http://www.nationalpost.com/search/...EC-AFED66FB02C7 This ( Babak's Link ) article : by Richard Salsman ( president of Intermarket Forecasting Inc., Boston.), Brings to mind the quote: "Methinks there are more things under Heaven and Earth Horatio, than are contained in your Philosophy". "TIME" is a difficult animal to understand - Greenspan is talking about a longer time frame perhaps. I think that one might discount the Fed's opinion - to their own peril. ( Not that I am a great "Fed Fan" - Quite the contrary ). I think we are within a stone's throw of the Dollar hitting bottom. Did that not sorta' look like an exhaustion gap the other day ? Not saying I'm right - but that's my position . Greenspan's comments on a "Softening Housing Mkt" , I believe were right on target. That could add to the deflation equation over the course of this next Decade - No ? I look forward to reading more great comments from ET'ers on this issue. ..............................