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JEleazarian
Trad climber
Fresno CA
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Nov 24, 2009 - 02:43pm PT
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jstan,
My call of inflation wasn't the first one I've made here. I find the parallels between the 1967 and 2003 credit crunches interesting, but the real parallel I see is between the recession of 1974-75 and now. While Jeff and I agree that Bernanke will not intentionally inflate the economy, I think the damage has already been done, and the latest stimulus has simply been too much too late.
Note, though, that the inflation after the 1975 trough in the economy took years to pick up steam. It's hard to imagine inflation now when home prices and interest rates are so low, but unless something changes drastically in the next two years, I expect to see it.
Now, a couple of caveats. First, a general one. In the words of one econometrician about thirty-five years age, "We're always one recession too late in specifying the exact terms of the price-output equations." If there's any real new learning in economics over the past thirty years or so, it's a recognition that our mathematical connections to economic reality remain exceedingly tenuous.
Second, the 1974-75 recession, in particular, had some important differences with current times. We were coming off several exogenous shocks to the U.S. economic system. We were finally ending wage and price controls (which, incidentally, have never worked for any length of time in any western economy), and the Arab oil embargo led to a then-unprecedented doubling of energy costs. The bursting of the real estate bubble has more in common with the early 1980's, but the inflation and exceedingly high nominal interest rates are not present in the current downturn.
Best advice: Listen to fattrad for trading strategy.
John
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Mason
Trad climber
Yay Area
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Nov 24, 2009 - 03:34pm PT
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There has been a massive amount of new money flowing into the money supply ($1.25 trillion) since March of last year with Treasury purchases and Mortgage Backed Securities by the Fed. There has been no inflation, so I don't see any inflation, except for the market. And I think the market is peaking and will start to slide in the next few months.
But I like active trading. I have the need for instant gratification.
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rockermike
Trad climber
Berkeley
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Nov 24, 2009 - 06:31pm PT
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A head of lettuce is $1.89 (up from $1 last year), but you can get a 48" flat screen for $200 (down for $400 last year) [ok, factitious numbers - but you get the idea]. Economists think those balance out, but I don't buy flat screens. I DO eat a lot of lettuce and other produce.
Good news, the rent on my rent control apartment (inflation indexed) only went up 40 cents this year. ha Finally something moved in my favor.
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Argon
climber
North Bay, CA
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Nov 24, 2009 - 06:48pm PT
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"I've beaten him every year, including the last two."
Thank you fattrad. Bill Gross certainly deserves multiple beatings. Now, can you please go to 85 Broad Street and beat the crap out of every Goldman Sach-er you can get your hands on.
Then head down to the Fed and smack Timmy around.
We'll all pitch in to help you make bail.
And if you can find out where Hank Paulson is hiding out, let us know. I'll bring the bazooka.
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Mason
Trad climber
Yay Area
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Nov 24, 2009 - 07:00pm PT
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Let me clarify.
I meant in the last 6 months. There has been moderate inflation, not counting the market and gas/oil futures.
And in the coming year or so there won't be much inflation. If growth begins to take hold, which I don't think it will for a while, and the Fed doesn't reel in all the fiat money its printed then there would be massive inflation.
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Ray Olson
Trad climber
Imperial Beach, California
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Nov 24, 2009 - 10:41pm PT
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"In 1929 the ratio of total debt (government, corporate mortgage and misc consumer debt) to gdp was 1.6. Today this ratio is 3.6 putting severe limits on our ability to borrow."
lemme guess,
outsourcing virtually all our manufacturing to asia
and...?
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