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New Signs of Deflation ? | |
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Date: September 03, 2004 01:04 PM
Author: Cookiemonster
Subject: Signs of deflation
My favorite chain book store is having another two weeks of "Buy 4 Get the 5th book free". By my reckoning that is a 20% price cut.
Also heard on the radio today that gasoline prices have dropped a nickel in this area. Going into a big holiday like Labor Day that is unprecedented.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183239)
Date: September 03, 2004 07:33 PM
Author: Vangel Vesovski
Did the price of hosing go down? What about food? Health care? Tuition? Insurance? Bottled water? Candy? Meat? It takes more than two data points taken out of context to reach a conclusion.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183401)
Date: September 04, 2004 04:58 AM
Author: Shawn
Subject: tuition cost
I know this is but one of many items, but it is difficult to determine the real cost of tuition. The listed tuition fee in a college catalogue is nowhere near what the average student actually pays. That particular number is the amount above which noone pays.
Considering scholarships, below cost college loans, over valued work study etc. make the actual cost hard to determine. Figuring out if it is actually going up or down may be even harder.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183506)
Date: September 14, 2004 02:45 PM
Author: Kay4
I agree that calculating tuition is nearly impossible. I am a college student and I get all kinds of surprises, like $92 for a single USED text, plus required software plus, plus, plus... and that is one class. After I graduate, I will have to work three jobs to just pay back my student loans... Where is the incentive?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186491)
Date: September 03, 2004 01:54 PM
Author: Chicagobear
Yeah, I am noticing that too. Maybe Mr. Russell is right about the deflation overwhelming the efforts of the Fedgov to inflate. I still won't buy long-term dollar bonds though. I guess I'm just stubborn that way. Give me money market and bullion.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183259)
Date: September 03, 2004 02:04 PM
Author: cherokee
Subject: both at the same time
... rising commodity prices (china wants them too!)
falling local prices due to competition.
for now consumption is financed by banks on your land as collateral.
dismal job market. falling value of labour.
end result : falling living standards (not there yet, but should start to see noticeable declines in a couple of years).
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183267)
Date: September 03, 2004 02:11 PM
Author: Finster
Subject: China
China will slow down once the US does. A lot of China's demand for commodities is undergirded by all the dollars flowing over there from the US. Forget the details and look at it from a black-box view - plentiful dollars, limited commodities - a formula for dollars to decline in value relative to commodities (higher commodity prices). If the dollar flow slows due to the US consumer slowing due to overindebtedness, then that will pressure commodity prices too.
Nevertheless, commodities are likely to outperform stocks for a quite a while.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183268)
Date: September 03, 2004 02:20 PM
Author: cherokee
Subject: US slowdown?
usa economy is barely creaking at 2.8% last gdp figures.
china is nearing breakout from usa. usa demand will still affect china big time but it seems china internal demand is becoming stronger all the time (financed by local land bubble).
long term looks bad for paper assets. in the medium term can't rule out panic flights to dollar/gold due to collapse of some secretive hedge fund - and bailout by printing presses leading to further moral hazard and liquidity.
the shit will hit the fane when the land bubble collapses.
then it is either japan or argentina. or likely, both.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183274)
Date: September 03, 2004 02:47 PM
Author: Finster
Subject: So
Let me see if I understand what you're saying. You see financial assets and wages falling in dollar terms? While commodity prices rise in dollar terms? Or just financial assets failing relative to commodities and vice versa? Dollar rises (deflation) first and then falls (inflation)?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183296)
Date: September 03, 2004 03:10 PM
Author: cherokee
Subject: yes...
... in the next year a mild deflation (due to china slowdown, fed's playing to the gallery sabre-rattling) followed by major commodity inflation and wage & paper asset devaluation (when china breaks out from usa - expect when it floats its currency) - this inflation driven by all those dollars in foreign accounts increasing in velocity.
chinese currency is a wild card they have gotten used to massive devaluations unlikely they'll maintain a strong currency. so where do they store their reserves once they float? probably basket of currencies + gold and move away from usd. which means major loss of face for usd. remember unlike japan china has no shortage of internal demand. plus china has lots of nukes and sooner or later will stop financing US military which threatens it.
in usd nominal terms nothing will fall after the mild deflation.
in real terms wages and paper assets will fall in usa.
oil has already shown the way. oil is a leading indicator because the supply demand is already on the margin.
all those petrodollars will not stay in dollars. if you are getting dollars which are falling relative to commodities, you'd like to convert them to commodities to retain value. ie, precious metals.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183301)
Date: September 03, 2004 07:41 PM
Author: Vangel
Vesovski
in the next year a mild deflation (due to china slowdown, fed's playing to the gallery sabre-rattling) followed by major commodity inflation and wage & paper asset devaluation (when china breaks out from usa - expect when it floats its currency) - this inflation driven by all those dollars in foreign accounts increasing in velocity.
Either you are not being clear or I am not getting something. (Probably the latter.) So let see if this makes sense to me. China is now growing at 9% (to pick a number). That translates to a great deal of increased demand for raw materials to build roads, hydroelectric generation capacity, buildings, Olympic stadiums, etc., over last year. Because of the increase of demand the price level of many commodities is rising. Next year China might slow down and only need 4% more than it does this year. Are you saying that the slower increase in demand will lead to lower prices and mild deflation? How does that happen unless the supply of these commodities increases faster than the rise of demand? And how does that happen when capital spending for most commodity producers is not raising quickly enough net of depreciation? Am I missing something or am I just stupid?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183405)
Date: September 04, 2004 12:35 AM
Author:
Finster
Subject: Dollar Denominated Demand
Remember China is to a great extent a pass-through vehicle for US Fed policy. Its currency is effectively the US dollar because it pegs the units it uses at a fixed fraction thereof.
Next, consider that "demand" by itself is a nebulous concept. We need to put some numbers on it. What units might we measure it in? Since we're interested in prices, a logical starting point is the same units we measure those in. Ultimately in this case, those units are the US dollar.
What is "demand" anyway? If a million people want something, and each has one dollar, we can say that there is one million dollars worth of demand. If each has ten dollars, we could likewise say that there is ten million dollars worth of demand. Note the "strength" of their want need not be any different; it's the expression of that want in currency units that determines prices.
See where this is going? This is really nothing more than the money supply theory of price inflation. If more dollars are created, each is worth less, and therefore (all else being the same) prices are higher. If we say prices are higher because of higher "aggregate demand", we are saying virtually the same thing merely in different words.
So many dollars flowing into China represent much dollar-denominated demand, and prices are higher because each dollar is worth less.
Conversely, if the quantity of dollars drops, dollar denominated demand drops, the value of the dollar rises, and prices drop.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183469)
Date: September 04, 2004 10:39 AM
Author:
Vangel Vesovski
Next, consider that "demand" by itself is a nebulous concept. We need to put some numbers on it. What units might we measure it in? Ultimately in this case, those units are the US dollar.
Units that describe weight or volume are probably sufficient. They certainly do not change their definition constantly like the FRN, RMB, Yen, etc. Will China need more tons of copper next year than this? Will they need more cubic meters of cement?
Conversely, if the quantity of dollars drops, dollar denominated demand drops, the value of the dollar rises, and prices drop.
You are really missing the point. I will get to it after I come back from the beach. But before I go I would like to point out that if China lets its currency float it could easily pay less (in FRNs) for the same commodity it now needs while you would pay more.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183564)
Date: September 04, 2004 11:59 AM
Author:
Finster
Subject: I Can't Miss My Own Point
Absolutely not. Currency units are the only relevant units for this purpose. The reason is simple. We seek to understand prices, which represent the value of the goods divided by the value of the currency.
The Chinese could buy X million tons of copper next year, but if we want information relevant to prices, we need to know how many dollars or renminbi they are willing and able to exchange for those tons.
I can't miss my own point. I know exactly what I am talking about here. China's abstract "demand" for cement is utterly meaningless to prices. If backs up its "demand" for cement with fifty billion dollars, those prices will higher than if it backs it up with fifty million.
You know as well as I do that if somehow nine out of every ten US dollars in the world suddenly disappeared, we'd be looking at single-digit oil prices in short order.
And the exact same number of barrels could change hands.
Bottom line: "demand" is totally irrelevant to prices unless it is backed up by money supply.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183583)
Date: September 04, 2004 07:55 PM
Author:
Vangel Vesovski
Currency units are the only relevant units for this purpose. The reason is simple. We seek to understand prices, which represent the value of the goods divided by the value of the currency.
I think that the only thing that matters in the long run is the reality of the relationship between physical supply and demand and that prices will have to adjust to that reality, not the other way around. The FRN is an artificial construct without any tangible value whose purchasing power can and does change extremely rapidly depending on various circumstances. While the FRN may increase its purchasing power over a very short period of time the general trend has been and continues to be down.
While many harbour fantasies of a declining supply of FRNs I do not believe that you can have a viable fiat currency system in which that happens. Fiat systems need steady expansions of money and credit in order to survive. Absent that expansion the fiat money becomes useless very quickly.
You know as well as I do that if somehow nine out of every ten US dollars in the world suddenly disappeared, we'd be looking at single-digit oil prices in short order.
When the pound lost most of its purchasing power the world did not stand still; Britain was simply replaced by the US and the gold backed FRN made it to the top of the monetary food chain. It is the same when the fiat FRN loses its purchasing power; it will get replaced by the currency of other nations or a monetary commodity.
I also do not think that in a world with an easy access to a printing press you would be seeing fewer FRNs until after they become virtually worthless. The most likely scenario is continual expansion of the money supply and the steady erosion of purchasing power (with violent moves over the very short term) until we get a series of events that would end the FRN's status as a reserve currency. After that happens you can say goodbye to whatever purchasing power that the FRN used to have.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183699)
Date: September 04, 2004 08:38 PM
Author: Finster
Subject: A Simple Quiz
Here is a simple, two-question quiz that will help us get to the bottom of this.
A. China has $5,000,000,000 in its coffers.
B. China has $500,000,000,000 in its coffers.
A. China has issued exactly $1,000,000,000,000 renminbi.
B. China has issued exactly $100,000,000,000,000 renminbi.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183710)
Date: September 05, 2004 07:36 PM
Author: Vangel Vesovski
In the first case you imply that China has to rely on the FRN in its coffers. Actually, it could remove the peg and start paying less RMB for its cement while you pay more for yours. In case I was not clear before, that was my point.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183989)
Date: September 05, 2004 09:38 PM
Author: Finster
Subject: Wrong
Answer
It's surprising that you're unable to answer such simple questions. Here are the answers:
The reason is that in both cases, it's the money supply, not "physical demand" that influences prices.
It has nothing to do with whether the currency happens to be dollars or renminbi. If there is more of them available with which to support "demand", the price will be higher.
Your point, as the record shows, was that
This was your reply to my point about money supply, not abstract demand, being the primary determinant of the price level. It is a point accepted by the Monetarist and Austrian schools of economics alike.
So do you agree this is correct or not? That if there is a hundred times as many dollars or renminbi or what-have-you available to back up demand, then prices will be higher? That it doesn't make one whit of difference how many tons of copper or cubic meters of cement I buy, if I have many more currency units with which to buy it, the prices will be higher?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184017)
Date: September 06, 2004 11:48 AM
Author: Vangel Vesovski
If the world needs 5 times more cement than producers were able to sell the price would go up significantly until new production were able to meet demand. The same is true of any commodity and is the reason why some commodities and finished goods can go up in price even in depressions.
Actually, I am surprised at you because you are observing the very process when you look at the price of plywood over the past year. The Iraq invasion and the two hurricanes rapidly increased demand well above capacity. The price of plywood increased much faster than the money supply. As long as physical demand is greater than supply, the price of commodities, goods or services will grow faster than the money supply. That explains why many programmers who were pulling in $150K per year in 1999 are lucky to get a job at half that level today.
And it is also possible for the price of cement for the Chinese to fall as yours goes up. All they would need to do is to remove the peg.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184175)
Date: September 06, 2004 12:30 PM
Author: Finster
Subject: Your
Example Proves My Point
This is incorrect. Price is a ratio. The value of the thing divided by the value of the currency unit. So you cannot draw any conclusion about price without factoring in the value of the monetary unit.
Next, there is no such thing as the amount of cement the "world needs". The world always wants more stuff than it can have. There are millions of hungry people on countries all through the third world that will tell you they need much more food than producers are able to sell them, but the prices do not necessarily rise, because they do not have the monetary wherewithal to buy it.
Your error comes in attempting to extrapolate from the micro to the macro. Plywood prices can easily increase under such circumstances, but the aggregate price level can not increase without an increase in the supply of money relative to the stuff it is used to buy.
In exactly the same way, Chinese "demand" is of utterly no moment with respect to prices unless that demand is backed up by the supply of money.
Once again, a purely monetary phenomenon. The peg merely defines the renminbi as a fixed fraction of a dollar, so as the dollar declines in value due to an increasing supply, so does the renminbi. If the peg is removed, that would make it possible for the renminbi to be valued independently, its relative value could rise, and therefore it could take less renminbi as compared to dollars to buy a given amount of cement.
Your example proves my point.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184188)
Date: September 06, 2004 10:05 PM
Author: Vangel Vesovski
This is incorrect. Price is a ratio. The value of the thing divided by the value of the currency unit. So you cannot draw any conclusion about price without factoring in the value of the monetary unit.
The general value of the monetary unit can stay flat but if physical demand for a commodity exceeds the ability of producers to meet that demand prices will go down. Generally, when we invest we make specific bets even when they are baskets of stocks, bonds, comodities or properties. As history shows not all sectors always respond to the money supply in the same manner.
Your error comes in attempting to extrapolate from the micro to the macro. Plywood prices can easily increase under such circumstances, but the aggregate price level can not increase without an increase in the supply of money relative to the stuff it is used to buy.
I have not made an argument about aggregate prices and have made it abundantly clear that it is my belief that things like real estate, equities and bonds will start to decline in value faster than the FRN at the same time as various commodities go up. I actually expect that physical demand for some of these commodities may stay flat or actually decline but also expect that supplies will fall faster.
The argument about general prices is the one that comes straight out of monetary theory; as the supply of money goes up faster than the supply of goods general prices are expected to go up. I am not disputing the theory, just your application of it.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184307)
Date: September 08, 2004 08:03 PM
Author: Finster
Subject:
Determinants Of Prices
I cannot agree. If anything, assuming a constant value of the monetary unit, with "demand" in excess of "supply", one would expect prices to rise, not fall.
But more to the point, no general increase in "demand" relative to "supply" (and concomitant general increase in prices) can occur while the value of the monetary unit remains constant. A general price increase means the value of the monetary unit has fallen. An increase in the money supply increases prices – as soon as someone attempts to buy things with the increased money supply, the inflationary effect of the increase in money supply on prices becomes apparent. It is a Keynesian fallacy to attribute the general price increase to real demand. It comes from the increase in money supply relative to the supply of things it is used to purchase.
If I have no dollars in my accounts, I can "demand" all I want and it means nothing to prices. It is only when I demand things with dollars that my demand has price significance.
If so, it must be that you misunderstood my application. If you refer back up to my original post (Dollar Denominated Demand) that you challenged, I said, inter alia:
I also said that ""demand" by itself is a nebulous concept". And it still is. If you say that China "demands" 900 million m3 of cement, I say "poppycock" and "balderdash". If there is only 450 million available, the remaining 450 of hypothesized "demand", is just that – hypothetical. Moreover, the amount of cement that trades hands, as you surely know, is a function of price. If 900 million is available, but the cost of that amount would be half of China's GDP, it will buy less. Then I will say that China's demand is not 900 million, but the lesser amount. Conversely, if the price is very low, China might even take advantage of the bargain and purchase more than 900 million and store it for future use, or perhaps undertake some projects that might not have been economical at the higher price. Then I will say that China's demand is not 900 million, but the greater amount.
In each case, I state that the 900 million m3 "demand" was an economist's fiction to begin with. The ultimate price and the physical amount exchanged depends on several variables: how much currency the purchaser has, how much the seller wants the currency, now much China wants the cement, and how able and willing the seller is to supply the cement. The "price" is the ratio between the value of one commodity, the cement, and another, the currency. Merely identifying some abstract amount of cement "demand" without considering monetary factors can tell us no more about the future commodity price than can your neighborhood psychic.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184935)
Date: September 08, 2004 08:21 PM
Author: Vangel Vesovski
Subject: OOPS..
I cannot agree. If anything, assuming a constant value of the monetary unit, with "demand" in excess of "supply", one would expect prices to rise, not fall.
Sorry, I reworded the sentence and left the wrong word in; I should have changed down to up. Thank you for catching the error.
But more to the point, no general increase in "demand" relative to "supply" (and concomitant general increase in prices) can occur while the value of the monetary unit remains constant.
How did we get to discussing 'general' price movements? My argument was regarding commodities and should be a simple one to understand, even if you disagree with the conclusions. It is my contention that after a 20 year bear market we are running into supply problems that will cause prices to rise even if demand declines due to a monetary contraction. If you remember, the idea was to make money by deploying our capital to the safest and most profitable venture.
I also said that ""demand" by itself is a nebulous concept". And it still is. If you say that China "demands" 900 million m3 of cement, I say "poppycock" and "balderdash". If there is only 450 million available, the remaining 450 of hypothesized "demand", is just that – hypothetical. Moreover, the amount of cement that trades hands, as you surely know, is a function of price. If 900 million is available, but the cost of that amount would be half of China's GDP, it will buy less. Then I will say that China's demand is not 900 million, but the lesser amount. Conversely, if the price is very low, China might even take advantage of the bargain and purchase more than 900 million and store it for future use, or perhaps undertake some projects that might not have been economical at the higher price. Then I will say that China's demand is not 900 million, but the greater amount.
It is not a fiction. If, based on current prices, the Chinese have planned to use 900 million cubic meters but the market cannot supply the commodity the price will simply go up to destroy demand. To suggest that price spikes are the result of the underlying supply of money is to ignore reality.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184948)
Date: September 08, 2004 08:32 PM
Author: Finster
Subject:
Dig Deeper
I figured something like that ... but it was more fun to pretend it was what you meant... ;-)
Uhhmmm... the thread is called "New Signs Of Deflation"???
Now it is "supply"? How did we get to discussing supply? ;-)
Dig deeper. How is it that the Chinese can plan to buy all that cement in the first place? Why can they contemplate such a thing? What's different from ten years ago that unlike then, they can now make such a determination?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184950)
Date: September 09, 2004 03:10 PM
Author: Vangel Vesovski
Uhhmmm... the thread is called "New Signs Of Deflation"???
But you are not giving evidence of a contraction of money or credit so why are you saying that prices are falling because of it?
How is it that the Chinese can plan to buy all that cement in the first place?
They give the producers some RMB. This would mean that they have less use for FRNs, which they will sell to reduce their exposure. The added FRNs would put pressures on American prices in an upward direction.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185164)
Date: September 09, 2004 08:14 PM
Author: Finster
Subject:
Reply At Left
Getting tight over here ... reply with new message below...
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185237)
Date: September 04, 2004 09:05 AM
Author:
cherokee
Subject: a lot of commodity price action...
... is speculative. chinese are building hoards of commodities like anyone else. once the bankruptcies hit there is bound to be unwinding of the carry and leveraged speculators and lead to at least some increase in dollar.
the fubdamental trend of the paper is down however
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183547)
Date: September 05, 2004 05:06 PM
Author:
Finster
Subject: Fundamental Trend
If the paper you're talking about is dollars, the fundamental trend is up. Left to its own devices the dollar would have to appreciate as all the people who have borrowed dollars seek them to pay them back.
Now that disregards the "non-fundamental" activities of the Fed. It is doing its damndest to inflate. We will have to see whether the natural forces of deflation or the unnatural forces of inflation get the upper hand next.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183941)
Date: September 06, 2004 11:08 AM
Author:
cherokee
Subject: collateral..
the fed will not allow the collateral for credit (land) to go down in price.
consumption is being financed by home equity.
since the lan dprices cannot increase in a vaccuum - ther prices will catch up. this means falling dollar.
traditionally the police work on dollar is done by the bond market, but intervention in bond market by official agents is endemic.
eventually the system will have to correct. the only way out is obviously massive inflation.
this inflation will be different from the past as commodities will inflate fast, whil wages will remain almost stagnant.
this is the way the correction in consumption will happen.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184152)
Date: September 03, 2004 03:43 PM
Author: The Reaper !
Subject: Present Deflationary Forces .
At this present time , in just about everything and in all channels throughout the pipeline , inventories have exploded . A great deal of the so called recent pick up in the economy , was due to the replenishment of drawn down inventories . That replenishment has been accomplished and then some . The global economy has begun to slow , so inventories will again have to be drawn down to match demand . Look for more joblessness in the U.S. , more if not many Asian devaluations and more and more government and corporate incentives to keep spending . Yesterday , I visited my local Buick / Honda / Hummer dealer . A 2004 model Buick Lasabre (New) with a sticker price of $29,700 was going for $21,234 , and the lot was full of them . There were 12 Hummers sitting there , when normally there might be 3 . They were even marking down their Honda lines . Just about everywhere I look I see falling sales and rising inventories . Even in housing , spec homes in this area are more than plentiful and they are not selling . If anything the deflationary forces are growing and becoming even more powerful . The Reaper !
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183308)
Date: September 03, 2004 07:44 PM
Author: Vangel
Vesovski
But the global inventories for silver, copper, uranium, coal, oil, tin, lead, nickel, corn, wheat, rice, cement are very low. Unless demand falls off a cliff there could be significant upward pricing pressure regardless of what is happening to the demand for Hummers.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183406)
Date: September 04, 2004 02:56 AM
Author: Ricardo
Smith
Subject: Slowing down
Vangel. While it's too soon to say, there are some troubling signs of a slowdown emerging. The Fed's July blip may be more. August retail sales are poor. Intel unexpectedly notes poor sales. Auto dealers have no traction even with discounts. Personal income is barely rising. Globally, interest rates are rising and house prices are falling in Oz-land and just dipped in the UK in the last reporting period.
All of this might mean nothing or it might be the first sign of winter. All the stimulation is already into the system. If we go off the track in real estate, Ben Bernanke's weird economics can be tried, but I doubt they will work fast enough to counter debt collapse. The jury's still out, but the prisoner's getting nervous.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183501)
Date: September 04, 2004 09:07 PM
Author: Vangel
Vesovski
Subject: Perhaps you are right but...
You may well be right but the inventory numbers to not lead us to that conclusion yet. While I suspect that we may have sufficient oil for some time to justify a decline to $35 (even $30 makes many companies very cheap) we still have problems meeting the demand for steel, copper, cement, food, lumber, etc. I have little doubt that the American consumer will eventually have to slow down (he probably has) but I still think that China and India will need to build more roads, dams, electrical power plants, electrical distribution systems, bridges, irrigation canals, sewers and other infrastructure. That consumes real stuff and if we get a slowdown I expect many governments to use the public works route to increase demand even further.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183719)
Date: September 06, 2004 10:54 AM
Author: Bud
Wood
Subject: Continuous demand for public works?
Seems that prices are always related to demand and demand is somewhat of a quasi-rational but more really an emotional response related to how positive people in general feel. If it was merely a matter of more money, prosperity could be printed. But printing money can't continuously create borrowers who will cycle money through the economy in order to continuously create economic activity.
It is undoubtedly true that public works will be used to increase economic activitiy. Consider what may be a continuing public work in which the USA administration is involved - - it's war. Been used countless times before, so maybe there is hope for us to continuously delay deflation. - - But sooner or later, watch out for that cliff ledge.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184145)
Date: September 06, 2004 11:55 AM
Author:
Vangel Vesovski
I said nothing about prosperity my friend, just that the Fed will use the printing press to prevent the FRN from gaining purchasing power. Like Bernanke and Greenspan have said a number of times, the Fed can print money to buy T-bonds. That money can be used for spending or for unconventional means such as the purchase of distressed corporate or consumer debt, physical assets, gold, etc. When Japan got in trouble its government funded massive public works projects in order to hold the economy together. I expect that the US government will try to do the same. Of course, without savings it will have to resort to more printing and the process will ultimately destroy the FRN. It is only after the FRN is destroyed that we will see the deflation and depression that Finster and company are predicting.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184178)
Date: September 03, 2004 11:53 PM
Author: SHANE R MATLOCK
Subject: WHAT'S IN YOUR WALLET?
NOT MUCH CASH & A LOT OF CREDIT CARD'S ? Then you my friend are on the short end of the stick! So many people with little to no savings what so ever, it's a disaster waiting to happen. Most folks are just a layoff or illness away from the poor house, what about you?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183457)
Date: September 04, 2004 11:28 PM
Author: Cookiemonster
Subject: Local Food Prices for Vangel
With the notable exception of Kiwi fruit , prices here for groceries are the same as last year. Dairy products are slightly higher, but I don't drink milk. And I tend to favor produce that is "In Season". People who eat out of cans may have a different perspective.
Stores are giving deep discounts to move the summer clothing. Today I bought 3 shirts for $12. Some of them were originally priced at $24 each last spring (I got the info from looking at the price stickers).
Also several small retailers closed up last month at the local mall. The retail people I talk to are all saying the same thing, that sales for the last two weeks were very disappointing.
Maybe we should be asking if anyone is seeing rising prices?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183744)
Date: September 05, 2004 03:51 AM
Author: Eleuthero
Subject: The ECRI Indicators are Clear on this Issue.
Growth is slowing dramatically AND inflation is building. Yes, they are not God but their forecasting record is virtually 100% over the last five years.
Vangel's ideas about cement, iron, etc. to me are IRREFUTABLE. There are too many people on earth and half of them are SCREAMING towards first world infrastructures.
I think the die is cast. The Mother of All Stagflations.
E.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183791)
Date: September 05, 2004 06:57 AM
Author: Finster
Subject: The Good Folks At ECRI
You are correct that there are too many people and that they are pursuing better standards of living in a world of limited resources. But that has no relationship to the question of inflation and deflation.
The good folks at ECRI probably understand that inflation is always and everywhere a monetary phenomenon.
Nebulous, undefinable, immeasurable concepts like "physical demand" are IRRELEVANT.
Demand has to be underwritten by money supply for general price increases to take place.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183810)
Date: September 07, 2004 07:24 PM
Author: Leslie
Subject: Signs of Deflation
Cliff Robertson, Oscar winning actor and neighbor in La Jolla, owns a very unique 7-Bedroom beautiful estate on 1.4 acres of pristine ocean property with rolling lawns down to the shore (very rare up and down the Pacific coast) which he purchased in the 1960's. It's been listed on the market for $25 M for at least the past few years, maybe even longer. Just recently, it's been reduced to a steal @ $19 M!
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184602)
Date: September 07, 2004 07:35 PM
Author: m.
If house prices deflate, it won't be one moment too soon, the bulls are smug and have been right for far too long. I won't feel happy until Bob's prediction of falling to ten cents in the dollar comes to pass - actually, that sounds too expensive, the bubble needs to deflate back to where it started, to reverse all the inflation = theft.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184607)
Date: September 08, 2004 01:57 PM
Author: Keith Cowan
Subject: Real estate housing bubble sized
According to the trend above baseline, US real estate is 20% above long
term trend. The period of adjustment will be long:
Previous peaks: | 1979, | 1990 |
Peak values: | 111% | 115% |
Previous valley: | 1984 | 1997 |
Valley values: | 97% | 104% |
Decline length: | 5 years | 7 years |
Loss peak to valley: | 14%, | 11% |
Ratio valley to peak: | .874, | .904 |
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184818)
Date: September 08, 2004 02:09 PM
Author: m.
I think UK house prices are worse than yours - hence our bank of England interest rates have to be higher - it will be the best spectator sport to watch London prices crash, fingers crossed.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184825)
Date: September 07, 2004 07:38 PM
Author: Thye Usual
Suspect
Subject: BWI to Ft. Meyers Florida....
All during the hurricane, they were pushing 59 dollar tickets.......on TV ads around Washington.
I would not have flown there, if they gave me a free ticket and 59 dollars...
Funster and Reapo are off there looting, as I speak....
don't know if they used those cheap tickets..
The secret password is: PUNTA GORDA
New space available in the trailer park I heard...
Also, you can pick your own oranges from the flood waters......
I saw an unmanned Yatch being blown down the Intercoastal and I think it's platinum platings weren't finished...
Oh, don't worry, the insurance premiums you land locked suckers pay will cover it....
Old JEB is to get new Billions from his older bro,,,,,
I think I should go down there and profess poverty,,,maybe worth a weekend's panhandle....
Beats hangin out on Wall & Broad with my 9-11 victum sign,, all that lagress is gone.......
And, I did not get my free million....
Oh for a 9-11 widows phone number.....
That will save my day..
HARRs
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=184609)
Date: September 09, 2004 03:44 PM
Author: len
Subject: Timely arrival?????????
by the time Deflation is a factor in any of our lives most of the kind souls posting now will have already been DEFLATED >
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185169)
Date: September 11, 2004 06:09 PM
Author: Leslie
You are going to be in for a rude awakening. According to Richard Russell, 99% of Americans haven't a clue of what is happening. The majority are locked into the PAST.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185775)
Date: September 09, 2004 08:14 PM
Author: Finster
Subject: Reply To Vangel - Uhhmmm...
It doesn't matter whether it's USD or RMB. As long as the peg is in effect, they're the same thing – the RMB is a fraction of a dollar, just like a dime or quarter.
I'm just saying that aggregate physical demand is irrelevant. I wasn't so much giving a pro-deflation argument as refuting your Keynesian argument that rising prices are due to a strong economy.
As for contracting credit, one needn't cite evidence of it in order to warn of it. Imagine a grand piano sitting on the sidewalk. You are standing next to it. If I were to warn you that it might be about to fall on your head, you would say I was crazy. And you'd be justified. But suppose someone with a crane began to hoist it up. I warn you that it might be about to fall on your head. You say I'm crazy, the piano is going up, not down. This time you would not be justified.
As someone with an engineering background, you presumably appreciate the physics analogy here. The piano may be moving up, but in doing so it is acquiring potential energy. If permitted to seek its natural level, this potential energy would be converted into kinetic energy, and thus pose a grave threat to your head. A similar thing can happen in the world of economics. By expanding credit beyond its natural level, the Fed is imparting potential energy. It is raising the height of credit beyond its equilibrium value. In doing so, it works against a restoring force. To switch metaphors, it is compressing a spring. The inflation represents the compression of the spring, and the spring exerts a restoring force of deflation.
The difference between our points of view is simple. You say I am silly because the piano is going up, the spring is being compressed, while in those movements I see an ever increasing potential for the piano to go down, for the spring to expand. You are looking at the past, I am looking at the future.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185238)
Date: September 09, 2004 08:23 PM
Author: JB
Subject: Deflation found
Right here. Quick, before it's price falls of a cliff and disappears.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185244)
Date: September 11, 2004 09:01 AM
Author: Vangel Vesovski
As long as the peg is in effect, they're the same thing – the RMB is a fraction of a dollar, just like a dime or quarter.
For a guy who claims to be looking to the future you make some strange assumptions. I do not believe that the peg will survive because it is resulting in huge inflationary pressures within China. One day the fear of inflation will be greater than the fear of the reduction of export flows and China will let the market revalue the RMB. That would make Chinese raw material costs come down while yours would go up.
I wasn't so much giving a pro-deflation argument as refuting your Keynesian argument that rising prices are due to a strong economy.
If you think that I am giving a Keynesian argument than you are mistaken. I understand what happens to general prices when the supply of money and credit changes and, since we agree, I am not that interested in debating the subject. As an investor my interest lies in taking low risk positions that are mispriced by the markets. At this time I see a major overvaluation of the FRN and an undervaluation of a number of commodities. Let be me clear about my point; at this time I see a major problem with the supply/demand picture.
We have had a two decade commodity bear that has made life hell for those that were in the sector. After attracting a huge amount of investment in the 1970s new supply capacity caused commodity prices to collapse. The collapse was made worse by the failure of the USSR, which dumped its massive stockpiles of raw materials in order to raise funds to finance its operations. During this period global demand was growing at a fairly constant rate but prices were still very soft because capacity was able to produce all that the market could take. (Please note that these prices fell even as the supply of money and credit was rising fairly rapidly.)
We come to the present when we have rising demand that is putting pressure on production capacity. But the real problem is larger because of depletion. Unless there is new investment in the sector we will have a reduction of supply that would require demand to fall in order to keep prices from rising. Some sectors are worse than others with cement being one obvious example. In those sectors prices will go up.
The only way that you would see a price drop in some of these sectors is to have a huge crisis that basically destroys demand on a global scale. But in such a scenario I do not think that an increase in the purchasing power of the FRN is likely and think that of the price drop in relative terms against monetary commodities. (In such a scenario the FRN becomes virtually worthless.)
As for contracting credit, one needn't cite evidence of it in order to warn of it.
I agree except that (in my opinion) a credit contraction would destroy the financial system and is unlikely until after some type of tipping point is reached. Corporate America has borrowed long and has plenty of cash on hand to survive a credit contraction. But how do the banks, GSEs and insurance companies survive a contraction of credit when their business models are totally dependent on its expansion? And if you have collapsing banks at home why would you expect that the FRN would increase in purchasing power against Russian oil, Canadian lumber, Mexican natural gas, Japanese cars or Chinese semiconductors? Those products may be in surplus but their supply is limited and they do have tangible value. On the other hand, the FRN's supply is unlimited and it has no tangible value other than its use as toilet paper.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185605)
Date: September 11, 2004 09:52 AM
Author: Ricardo Smith
Subject: Toilet paper dollars
V. "On the other hand, the FRN's supply is unlimited and it has no tangible value other than its use as toilet paper".
Speaking without first hand knowledge, from its shape, size and texture I think the dollar's days as the new Charmin, would be very limited. The old large denomination Italian lira notes might be better but hard to find. Swiss 1,000 franc notes at least come closer by size. Even if dollars might find a niche market among those dimensionally challenged by height, introducing cocaine to non nasal parts of the human anatomy, might find a reluctance of users. Has the Greenspan Fed a definitive study on this?
ric.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185625)
Date: September 11, 2004 10:14 AM
Author: DaveGillie
Why do you see the weakness of a peg of RMB to FRN's but don't see the same problem of pegging any fiat to gold?
DaveGillie
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185633)
Date: September 11, 2004 02:46 PM
Author: Finster
Subject: Dave
You raise a crucial point. Any gold standard is only as good as the entity that stands behind it. The US had a gold standard prior to 1933, and the Roosevelt administration simply ended it by decree. So you have a gold standard, but it can be ended at any time without notice. What good is that? This is but one reason A Gold Standard Will Be Unworkable.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185729)
Date: September 11, 2004 11:54 PM
Author: Vangel
Vesovski
If the FRN were pegged to a monetary commodity the Fed could not expand the money supply at whim and the governments cannot inflate away the purchasing power of your savings. Prices would be set by the markets and money would have a store of value characteristic. How is that a weakness?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185832)
Date: September 11, 2004 12:40 PM
Author: Finster
Subject: Giving Government Too Much Credit
Now where did I make any assumptions about the future status of the peg?
I think you did make a Keynesian argument. You argue that prices will rise due to a strong Chinese economy. I take a Misean tack, arguing that if prices are rising, it is due to a strong supply of money and credit.
This is exactly what I mean. There is a supply and demand imbalance, all right, but it is mostly a matter of the supply of money and credit outstripping the supply of commodities.
Your argument is primarily about the fundamentals of commodities. I can agree in the limited sense that commodities are likely to outperform financial assets for some time; probably years. But there is one commodity in particular that is likely to outperform financial assets, and that could even outperform many other commodities for a meaningful period of time, and that's currency, not limited to but including the US dollar.
Your remarks here are generally well taken except that we need to better define what we mean by "destroy the financial system". In particular, what should we expect to see between where we are and this ultimate destruction? What happens after credit begins to contract but before the financial system is "destroyed"?
We need to acknowledge that none of us know what the exact path will be or how long it will take. We must remember that Japan has experienced years of deflation, her ten year bonds have been in a bull market that no one thought would last this long, sporting a nominal yield of 1.5%. In the 1970's people all over the US, including my own family, were stockpiling gold, silver, and freeze dried foods because they thought the destruction of the financial system was imminent, but along came Reagan and Volker, and - what do you know - that was the beginning of a quarter century of disinflation.
The end of civilization might indeed be near, but we've heard that too many times now to say it's going to be next month, next year, or even three years from now, and bet our entire nest egg on it. We need to assess the odds, and plan for the possibility that accelerated inflation is right around the corner, yes, but also that a period of deflation, too long for us mortals to ignore, could come between us and the hyperinflationary demise of the dollar.
The demand for US dollars is pretty darn high, too. We can pipe dream all we like about how comfy we would feel if some government agency stood ready to redeem US dollars for gold or silver, but if we so do we overlook something even stronger and more reliable. We have millions of people who owe these US dollars, and whose creditors can and will pressure them to make good on it. They stand ready to redeem US dollars for houses, cars, crops, hours of labor, what-have-you. If you think some government agency's promise is better than that, then you have more respect for government than I do.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185677)
Date: September 12, 2004 12:33 AM
Author: Vangel
Vesovski
You argue that prices will rise due to a strong Chinese economy. I take a Misean tack, arguing that if prices are rising, it is due to a strong supply of money and credit.
No, I made the case that for some commodities the supply cannot meet new demand and that is the reason for the divergence in their price from what you see in the general price levels. That divergence has nothing to do with the money supply but simple supply and demand. Mises was big on supply and demand as well as money and credit my friend.
There is a supply and demand imbalance, all right, but it is mostly a matter of the supply of money and credit outstripping the supply of commodities.
It is not because we do not see the price of finished goods go up at the same rate (the trend is actually flat or negative for many goods). Supply and demand considerations can cause the price changes for many items to diverge from the general price levels that may be attributed to the change in the supply of money.
Your remarks here are generally well taken except that we need to better define what we mean by "destroy the financial system". In particular, what should we expect to see between where we are and this ultimate destruction? What happens after credit begins to contract but before the financial system is "destroyed"?
The financial sector has made a number of questionable loans or has entered into losing derivative positions. (Both sides of a contract cannot be winners when the tide changes.) That would mean that losses would have to be written down. When that happens you can find that many institutions do not have adequate capital to stay solvent (think S&L crisis) and would have to be liquidated. But this is a bigger problem than it seems because some of the losers are counterparties to trades with other financial institutions, pension plans, governments, etc. When they go under the other side of the contract has to make an adjustment for the default and can also fail. It is like a big daisy chain with a series of loans going from one institution to another. As soon as one link is broken everyone in the chain is vulnerable. When that happens you get a huge injection of liquidity in the system and a run away from currency into an asset class that is not anyone's liability. Usually that means precious metals.
In particular, what should we expect to see between where we are and this ultimate destruction? What happens after credit begins to contract but before the financial system is "destroyed"?
A system can become illiquid overnight and you could simply get a bank holiday declared extremely quickly as panicky investors try to withdraw some of their deposits from undercapitalized financial institutions. If you are hoping for a short period of time in which you can make a killing you may be mistaken because there are not enough exit doors to meet the needs of those who want a path to safety.
We need to acknowledge that none of us know what the exact path will be or how long it will take. We must remember that Japan has experienced years of deflation, her ten year bonds have been in a bull market that no one thought would last this long, sporting a nominal yield of 1.5%.
Correct, none of us can be certain of what will happen and that is why it is best to take a historical perspective. If the US government can borrow from its citizens and use the proceeds to purchase the bonds of other governments in a type of carry trade you too can have a Japan type experience over the next decade. Of course, there are no savings in the US and it needs inflows of foreign capital to finance its current account and budget deficits. Usually, countries that take such a path have to revalue their currency. Some have done back of the envelope calculations and their results imply that a 50% reduction in the purchasing power of the FRN would be needed to get to a balanced trade position. Unfortunately, that is not a scenario that you are hoping for.
The experiences of my family and my wife's family indicate that devaluations can come extremely quickly and that they can lead to the total destruction of the currency in a short period of time. My uncle saw two currencies in two different countries become worthless within a very short period of time without benefit of an increase in purchasing power. My wife's grandmother had a similar experience and tells us of using buckets of paper money to buy a few eggs before the money became totally worthless.
The end of civilization might indeed be near, but we've heard that too many times now to say it's going to be next month, next year, or even three years from now, and bet our entire nest egg on it. We need to assess the odds, and plan for the possibility that accelerated inflation is right around the corner, yes, but also that a period of deflation, too long for us mortals to ignore, could come between us and the hyperinflationary demise of the dollar.
I am not calling for any end of civilization, only for an adjustment that reflects actual reality. The US consumes too much and produces too little for its currency to be valued as highly as it is against other fiat currencies. And all fiat currencies are expanding so rapidly that I doubt that they can maintain even a modest reduction of purchasing power. The Fed can still save the day by linking the FRN to some monetary commodity that limits its ability to create money out of thin air. While I doubt that it would want to do such a thing it may be forced to do so by a Congress that is forced to act as it should have many years ago.
And I think that you need to keep in mind that the greatest pain comes from exactly those events that you do not anticipate or expect. I would say that the majority certainly thinks that the FRN is still sound and will remain so for years and that what happened to the currencies of many other countries cannot ever happen to the US. Because I do not share such a view I choose to hedge in a way that is not very common in today's environment. Funny but I always felt that a lonely hedge position was often the safest one I could take.
We have millions of people who owe these US dollars, and whose creditors can and will pressure them to make good on it. They stand ready to redeem US dollars for houses, cars, crops, hours of labor, what-have-you. If you think some government agency's promise is better than that, then you have more respect for government than I do.
Obviously I have not been clear. The FRN is not backed by anything tangible and it is not much of a feat for the Fed to redeem all debt held by foreigners by printing more notes. The government could then exchange the old notes held by Americans for new ones that can be used within the US. Since the old notes cannot be repatriated they would simply become useless to foreigners. Of course, the dollar's status as a reserve currency might be over but its position could be regained if the currency were linked to some monetary commodity such as gold. That is if your country still has much left in its reserves.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185836)
Date: September 12, 2004 10:01 AM
Author: Finster
Subject: Of Pianos And Springs
But you have yet to explain how that demand is underwritten without invoking money supply. My explanation is complete in that it acknowledges that there is no such thing as abstract demand when it comes to explaining pricing. If the Chinese did not have coffers bursting with US dollars and renminbi (no difference, as I explained earlier), price increases would be DOA no matter how much they wanted the stuff.
I'll bet Bangladesh would like to have loads of cement, copper, oil and foodstuffs, too, but its "demand" has nowhere near the impact of China's because it has nowhere near the dollars to back it up with.
It is, for the reasons above. It may well be that the prices of finished goods lag, because they have a greater labor content and the labor supply is abundant. The commodity price differential is explained by the fact that China does not itself have natural resources commensurate with its enormous population, and therefore some of the commodity supply must be externally obtained.
I do not deny that such a scenario is possible, but also cannot deny that there could be a substantial period during which the shortage of dollars would exert a deflationary influence. In the US, for example, I find it ironic that you focus exclusively on that portion of the population that has substantial wealth, particularly in the form of dollars, while overlooking the well-known abundance of people who are in debt. The actions of the former will indeed have an impact, but behavior of the overwhelming mass of people in the latter position is likely to lead to big surprises for anyone who does not adequately factor what will drive their actions.
I have no idea what you think I am "hoping for", but wishful thinking has little to do with my assessment of the risks. Getting out our macroscopes, the trade gap of around 5% of US GDP implies that the US is living beyond its means by about 5%. A return to balance would therefore require about a 5% haircut to US consumption based on current production levels.
This is apparently either a matter of fundamental disagreement or you have failed to appreciate what I just said in the last post. Let me repeat that the US dollar is backed by something tangible, and not only that but the backing it has is more substantial that any government agency's promise of redemption in gold could possibly be.
Rather than a government agency standing ready with a promise - which could be revoked at any time - to redeem its notes in specie, the US dollar has something better - millions of people standing ready to redeem those notes with labor, assets, goods and services. An overwhelming number of such people do so because they are indebted.
To be sure, government actions could undermine this state of affairs, for example by an implementation of Ben Bernanke's infamous helicopter drop. But that makes it no more vulnerable than any gold backing - in fact, it is less vulnerable because a government agency gold backing could be destroyed with one stroke of a pen, while the widely distributed nature of a millions-of-debtors backing would be much more complicated.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185902)
Date: September 12, 2004 08:33 PM
Author: Vangel
Vesovski
Subject: Occam's razor ...
But you have yet to explain how that demand is underwritten without invoking money supply.
You are overcomplicating the picture as usual. The money supply can be flat and Chinese demand can still cause the price of cement to go up or a severe drought can cause the price of wheat to go up. No need to offer a complicated explanation when a simple one will suffice.
Got to go and put the kids to bed. I will continue later.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=185989)
Date: September 13, 2004 08:51 PM
Author:
Finster
Subject: Pot, Kettle...
No, you are overcomplicating. Inflation and deflation have nothing to do with any single commodity.
Except currency. If someone handed you one trillion US dollars, I suspect the price of gold would go up. If it was handed to China, cement and copper would go up.
But wait ... that's what happened!
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186307)
Date: September 13, 2004 09:13 PM
Author:
Thye Usual Suspect
Subject: EGG Price in China??
OH Funster, whats your current Fix on the price of a dozen, in Hong Kong now???
REAPO's weekly supply of Viagra has not arrived in more than a week,,,and that's the surest sign of deflation now known, according to MRS. REAPOs...
TUT
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186314)
Date: September 14, 2004 02:31 PM
Author:
Vangel Vesovski
You are talking about general inflation and on that we agree. As long as you have inflation of the supply of money and credit (easy when you own a printing press and control the banking system) you will get inflation. That is not the issue that I was trying to discuss.
My main concern is how to make money even if we get a short term slow-down in which currencies do not lose any purchasing power. (As you know I do not believe that you will see the purchasing power of the FRN go up.) My thoughts on the subject are simple; the lowest risk holdings over the short term are commodities in which supply is shrinking or growing much slower than demand. That leaves us with gold, silver, coal, oil, natural gas, water and food as fairly low risk options, especially when compared to the holding of US bonds, FRNs, real estate or equities.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186487)
Date: September 14, 2004 08:23 PM
Author:
Finster
Subject: Food & Water
We also have, perhaps paradoxically, quite a bit of common ground in investment preferences. I know of no good direct water plays, however; I figure since the main difference between salt water and fresh water is energy, that my energy investments cover it indirectly. If you have any other suggestions, I'm all ears. Also I have just one food-related investment, the Argentinean CRESY. Again, any other suggestions would be welcome.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186583)
Date: September 15, 2004 11:53 AM
Author:
Vangel Vesovski
My problem with water is the politics that are involved. Few utilities will realize the type of profits that their investors expect because governments do not want the bad press. As for specialty companies in the treatment side I have trouble with the lack of protection from competition and some accounting. As such I am staying away from the sector at this time.
I did look at CRESY and liked what I saw but have remained cautious and not purchased it at this time. With the markets selling at massive overvaluation levels I expect that even a company like CRESY will not be immune in a downturn.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186770)
Date: September 15, 2004 09:50 PM
Author: Finster
Subject: CRESY
That was not necessarily a suggestion. CRESY is very hard to evaluate given the political and currency situation. I only have a small position myself and while I think it has merit, consider it speculative. And if the equity markets turn down, I wouldn't count on any stock being immune.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=186986)
Date: September 17, 2004 04:20 PM
Author:
DaveGillie
Subject: Food & Water play, albeit
very indirect.
I can't think of any direct ones. It's amazing how many people advocate food and water co.'s then can't name a single decent one!
MY choice is an indirect one, CMS. (Consumers Energy Co.) pays a decent divident too, history of bad management but sorta cleared up now.
it's the utility serving much of Michigan OUTside of Detroit area. I consider it's fortunes tied to outstate Michigan in general. Here in Michigan I can't imagine running low on good water. and we've a good agriculture base, partly from the water. Course, the Socialist Fascists running this state are so hateful stingy greedy that they refuse to even let tankers take a few gallons of the great lakes out with them!! Too bad, it's like Texas having passed a law in the early 1900s prohibiting oil from leaving their state!
DaveGillie
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187616)
Date: September 17, 2004 05:11 PM
Author: Finster
Subject: Water
Indirect
Thanks, Dave. Some people have proposed direct water investments, but in general, the energy route is probably at least as good. Looking at it on a global level, there is no shortage of water per se - we literally have oceans full of it. What is not so abundant is fresh water. And the main difference between salt water and fresh water is ... energy. Starting with salt water, you can make as much fresh water as you want and get it anywhere you want it if you add energy.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187632)
Date: September 17, 2004 06:54 PM
Author: tbo
Dave,
my screens (yahoo and harrisdirect) show no dividend on CMS?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187672)
Date: September 15, 2004 10:45 PM
Author: Dan Osborne
Subject: Political Economy
Personally I think wages will go down world wide and the amount of currency in circulation will go up.
How? by easy credit more and more money will be used in speculation, such as real estate.
Even though the amount of currency in a economic system is important for price inflation. Where that currency lives is also very important. For instance if that currency is just ate up by inflation in the housing sector and monopoly in the insurance sector. Then these and other sectors could "soak" up the inflation while deflation could exist in other sectors, at least in the short term.
The stock market game depends on increasing money supply pumping more money into the market faster than inflation in other sectors. This indicates to me that the stock market depends on new money going into it's system faster than in the economy. If not what does this mean?
Dan
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187009)
Date: September 16, 2004 12:47 AM
Author: Lucius Foster
Subject: Instinctive actions to Economic and Social changes.
When due to a small difference in opinion I left the service in 1954. Small little matter everybody in the Pentagon was keen on going to Vietnam, and I just having returned from a handholding with the French in country and current in the language and the people, said, oh my God NO! It is a people's war and big countries stay away from people's wars until they are finished. So I resigned. I cried all the way to the men's room. In the Pentagon most of the really dramatic scenes are played out there. Well, there is one single star wearer who lets his rubber ducky swim in the toilet.
My biggest adjustment to civi life was learning to use my nose. Ignore the charts and graphs. Respond to present time situations and from them develop the instinct to see the logical movements up and down in the economy and in the society. Some of the little hints are very small. The patronage in a favorite restaurant suddenly declines. The offer you made a month ago on a piece of property at which time the Property owner had escorted you to the sidewalk with instructions to never darken his doorway again. Usually accompanied by some very derogatory remark concerning the legitimacy of your birth. But there he is on the telephone, asking if you could meet him for coffee, he wishes to respond to your offer.
The elderly maiden lady who has sneered at your suggestions she increase her 2% yield on capital by switching from annuities to discount real estate mortgages that will on proper selection give her a steady 12%. You get an invite to tea. Hers is laced with gin but you are not supposed to notice. She has decided to convert so she can pay her rent. All that she requires is that I sign a personal guarantee. I do. I am confident, if it is good enough for her money, mine will also be there. Most Real Estate Brokers do not do this it is considered a naughty but I do. Keeps you very honest and very very careful.
Now these small-unrelated little items are indications of a change in the economy. I cannot speak for the world or the nation, but in my own strange far out eclectic (they wish) area I feel it. I have learned to trust these small prods on my mind and react accordingly.
One of my best semi breathing barometers is an Albanian waiter in an Italian Restaurant. He in exchange for a small Pernod and Beer, I said he is an Albanian! Tells me of his tips, they are very reflective of the Motion Picture Industry. His accent is Greg and spitty. Mine is Tog and pithy. I think he uses an essence of Garlic for an after-shave.
Now these are the things I consider and adjust my motions and the investments of my strange clients.
Of course sometimes you utilize their objections and negative responses to take a positive action. Like Freddy Motor mouth the Actors Agent. Whatever up he gives me I translate it as a down. He says Disney has a red-hot script and the Troll will remain in control for another two years. I always discount it. He got his Mothers married name wrong. To put his ring on the correct finger he has to count them every morning. Perfect agent. What he really does well is imitate a Western Union Messenger Boy on a bicycle. Carries scripts around town and dumps them on readers, the people who read for big producers. Big producers usually have a literacy problem, they do not read well. In any language. If left to their own devices Dick and Jane would never get back down the hill.
Now I really do not know if this is a correct system to use. All I know is when I go back into my schooling, read up on all the various really profound writings on economics and the phases of society, I do not seem to get anything that works. Oh Taylor maybe on his projected lengths of time that a Democracy can stay at cause and the various stages society goes through as it spins the circle and comes back again. But I cannot live long enough to make a living on his eloquent but quaint writings. I need direction week by week.
So I go back to my sniffing of the air and the blinking of the eyes of those who try to do business with me. I suggest that perhaps some of you might try it. Sort of fun.
Cheers Lucius
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187030)
Date: September 16, 2004 05:57 PM
Author: Dan Osborne
Subject: Interesting
Instincts, first I guess you assume that any who want money are crooks, those in the business are crooks. So charts, graphs, offical buy signals are things to question. One thing DR and others may miss is that the big guys guide the market and enough lumps go ahead and buy, well then the paper inflates. The power of positive thinking and nothing else to do with money and of course a dose of need and greed such as for the old lady with too little pension. This tends to pump things up and up beyond reason.
You point out money supply is the reason for inflation and so it is true. This last post shows your hound dog approach of finding what to do, nose on the ground sniffing. A interesting difference.
I myself, always, continue to wonder what the truth is the media seems to lie at every broadcast. Miss truths half truths outright lies, bending of history. So to call the fall of a empire due to anything but a exhausting of resources may be another lie. The victor always write history, but I tend to trust historians more than most, the guys who obtain little qoutes for daily R consumption have a agenda.
What I would like to do is go to ground and look all over the place, for other purposes than investing.
To trust your instincts in a micro enviroment is hard. To trust the over all information by most sources shouldn't be trusted. What is your take on the DR investing groups that you have to pay for?
Personally from what I know of history the elites will get their way for some time before revolution starts. But the elites are no doubt divided and diverging directions are always present.
My nose on the ground tells me that the people of the USA still have no clue and in general will go to third world status, with some kicks and a screem but they will go. After they slip toward a 4th world status the intellectual change will be interesting-globally. Of course some of this depends how much smoke and mirrors by the elites is done and bought by people.
Dan
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=187291)