A Tidbit from Dave Rosenberg on Inflation

I can see the arguments for both inflation and deflation. I tend to favor the inflation crowd but it may take a year or more to become a problem.

I don't see the economy slipping back into a steep decline because Americans are innovative enough to have adjusted to the current/past crisis. But, if Obama gets healthcare or cap & tax passed or any other massive bill requiring megataxes all bets are off on the economy.

Normally real estate leads us out of recessions. I don't think that will happen this time because the baby boomer demographics (moving to smaller homes then assisted care), which was supposed to begin kicking in in the 1990's, is going to keep housing depressed or at least limited.
 
Quote from pspr:

I don't see the economy slipping back into a steep decline because Americans are innovative enough to have adjusted to the current/past crisis.
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LOL
 
Quote from makloda:

Or this one, from November 2002 (http://www.financialsense.com/transcriptions/2002/Faber.html):

At the time the S&P was right at 900, a few months from the 2003 rally that would take it up 72% from the time Dr. Dumbass made his amazing call.

Not having a public track record that "remembers" your wrong market calls can be very convenient.
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Your comment is pure sour grapes. Truly pathetic.
You assume that Dr. Faber never makes bad calls and tells the world that he never makes bad calls.
Everyone makes bad calls- including him.

More importantly, I would wager a grip that he makes more good calls than you, and has the personal track record to prove it. And considering how often he makes calls, I would bet that he would kick your ass in a 'market call' contest...
 
Quote from PragmaticIdeals:

This analysis, while being technically commendable, fails to incorporate the asset-inflationary aspects of the Fed's activities.

A comment on this very blogpost describes what I'm saying more succinctly than I probably would:

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"I think it is important, as others have mentioned in these comments, to differentiate between goods inflation and asset price inflation. For those who operate strictly in the debt market, asset inflation is of significantly less practical importance because the focus is on real rate spreads on credit, which are defined relative to CPI.

For investors in broader asset markets, inflation definitions take on greater practical importance. One way of looking at inflation is too many dollars chasing fewer goods. Another definition involves too many dollars chasing too little productivity investment. This can be quantified by a measure called the Marshallian K.

Without going into too much detail, Marshallian K is the ratio of growth in the monetary base relative to growth in GDP. If companies can not achieve a positive return on investment in projects that expand economic output (due to overcapacity), but the money supply is expanding anyway, the excess dollars will find their way to asset markets and push asset prices higher. This is a useful definition of asset price inflation.

Eventually, the wealth effect of asset price inflation may cause consumers to borrow against their wealth for current spending, and this will push the price of goods higher. In this way, asset price inflation can cause CPI inflation even in the absence of real productivity growth, or real growth in GDP per capita.

Comments welcome.

Adam"
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I disagree with you/Adam there, pi.

That's precisely the point that AI makes... Specifically, with an impaired credit channel asset price price inflation does NOT translate into CPI.

I completely agree with the logic as applied to the bubble years, where credit was too readily available and households could easily 'monetize' inflated assets. The Fed totally missed/ignored it by using the OER measure as a CPI component, so Adam's criticism is completely on target. However, we're in a different world now (or should be).
 
Quote from peilthetraveler:

Way to go! Compare us to a nation with lots of manufacturing and also to ourselves back when we were a manufacturing nation
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The USA is still the largest manufacturer, producing almost twice as the next one - China - in total dollar value.
 
Quote from Martinghoul:

I disagree with you/Adam there, pi.

That's precisely the point that AI makes... Specifically, with an impaired credit channel asset price price inflation does NOT translate into CPI.

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Asset price inflation will inevitably trickle into consumer markets.

And if only a small portion of it does (because it's being countered by deflationary forces), this is arguably WORSE because it means "main street" has lost jobs and purchasing power whereas capital-owners have boosted their REAL wealth (due to the printing press and not "hard work" -- technically due to failing in the free market).

Often times, we economists attempt to rationalize silly policies like printing money with a range of theories.

These theories have merit at the proximate level. Proximate being the key word. On a macro / systemic level, these types of policies will likely only aggravate matters and inequity.

You can't just print money (or increase the M2/M3/whatever supply) and think that it will improve the real conditions of the average (but especially lower class) American.

Never mind the foreign nations which credit the US which are obviously big losers every time a dollar is printed regardless of whether inflation occurs or not. Again, this is a proximate "win" for the US, but as we have seen, the foreign credit will rapidly dry up with these policies and/or the US dollar will lose its status as a reserve currency (China is already spending more on commodities and entering into bilateral trade agreements with other nations WITHOUT the dollar).

Call it the butterfly effect.
 
Quote from TraderZones:

The USA is still the largest manufacturer, producing almost twice as the next one - China - in total dollar value.
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Maybe it's more a matter of semantics...

"Production" in the USA is counted with an average wage component of what, $20/hr or so?

Production in China is counted with an average wage component of $1-$3/hour?

Could it be that China is outproducing the USA in UNITS?

I don't know the answer... just a thought...
 
Quote from Scataphagos:

Maybe it's more a matter of semantics...

"Production" in the USA is counted with an average wage component of what, $20/hr or so?

Production in China is counted with an average wage component of $1-$3/hour?

Could it be that China is outproducing the USA in UNITS?

I don't know the answer... just a thought...
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Units are virtually irrelevant. Dollar value represents the willingness to pay of the market for a given commodity and is the most important figure.

If I produce 1 tv and you produce 1000 crappy t-shirts, I win.

Of course, (long-term) profitability is probably an even more important issue than overall revenues...
 
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