Sony just announced layoffs. The problem, as I have identified, is that wall
street is looking for signs of slowdown as good news because they are
inflation watching. The problem is really that deflation is the boogyman now.
Much of Asia, and parts of South America, and Russia are suffering from
dropping prices which lowers the value of the collateral on which their
national banking systems rest. As prices of raw material commodities fall, and
as they devalue their currencies to increase global market share, they cannot
ever hope to pay back their dollar denominated borrowings.
These are unrealized loan losses. In todays fiat money system, loan losses
equal a drop in the money supply, which is called deflation.
The Fed has everyone on the lookout for inflation, so the market responds
favorably to deflationary news. When they finally figure out that deflation is
the problem it will be too late and we will be in the grips of a deflationary
spiral, like Japan is today. Lower price EXPECTATIONS lowers consumption
because you can buy it cheaper tomorrow, business suffers, people pull back on
consumption further with economic uncertainty, prices must be further dropped
in order to bring in the
revenue needed to finance the debt, i.e. trade volume for profit, and again
people refuse to consume at the lower prices. This is exactly what is
happening in the worlds second largest economy, Japan, right now. All
government efforts at stimulation through tax cuts, monetary "growth", and
fiscal spending are quickly squirrelled away by the Japanese public, for fear
of the future.
There are inflationary pressures right now in the United States however which
could be used as a counterargument to what I just wrote. M3, the broadest
measure of money supply has grown $600 billion to $6 trillion in the past 12
months. In my opinion, BECAUSE of this, the stock market is in an inflationary
spiral, people just dont view price increases of things they own as inflation,
only price increases of things they will want to own in the future. The reason
I feel that this does not negate my deflationary arguement is that I view our
economy as moving from inflationary, to dis-inflationary, to deflationary. But
we are still moving upwards, at a slowing rate, and when we finally reach the
pinnacle, the downside(deflation) will be swift. Like climbing a mountain that
we are just nearing the top of the peak.
Y2K will be blamed but it is nothing more than a large boulder knocking out
the critical stilt from a house poorly constructed on the side of the
mountain. All such houses are on the downside slope due to the law of gravity.
The fiat money system is the mountain and the national economies are the
houses. Given enough time, and imprudent room aditions, all such economies
will end up at the bottom of the mountain.
So if I am right, and we are in a deflation, then RP may be one of the first
industries hit insofar as it involves R&D.
Steven Pollack
http://www.familyjeweler.com
http://www.chicagonorthshore.com
http://www.familyjeweler.com/fortweb.htm
Vern Carter wrote:
> Being in Indianapolis we continue to here about the demise of
> Compression. It seems the rumors are now true. Sorry about there bad
> luck. Big is obviously not better when it comes to this line of business. I
> think we are seeing that the larger the company the more difficult it is for
> them to stay focused. Or is the sky just falling and we picked the wrong
> line of work? ------- I think not!!!
For more information about the rp-ml, see http://ltk.hut.fi/rp-ml/
This archive was generated by hypermail 2.1.2 : Tue Jun 05 2001 - 22:51:10 EEST