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Mix-Ansicht- Deflation... - CRASH_GURU, 10.05.2003, 16:03
Deflation...
-->Von Doug Nolan's letztem Kommentar:
Otmar Issing: “There’s not the least evidence of deflation in the euro region at the moment.”
Wim Duisenberg: “In the sixteen years that I was governor of the central bank of the Netherlands there were two years that we had deflation of minus one-half, and I publicly declared that I had lived in the central bankers’ paradise.”
Question: “How do you solve the problem of (the weak) sectors that can go into deflation?”
Response from the ECB’s Chief Economist Otmar Issing: “The concept of deflation is not a question of sectors and countries; it’s a question of the (entire) monetary area. In all large monetary areas in the world there are regions that are slow and even sometimes negative developments in prices, and others which are higher. So this is not specific for the euro area, but has nothing to do with deflation. Deflation is a concept related to monetary policy for the whole entity - for the average of monetary area. Sector price developments, this is a question of relative prices. And it’s quite normal. For example, in the computer sector you’re at extreme declines. Telecommunications, this is daily lives and even strong declines in prices. This is a question of relative prices of a market economy. This is totally different from the concept of deflation…”
My comment: Dr. Issing’s analysis is, as expected, both quite astute and most pertinent. The problem in the U.S. today can be succinctly explained as - in contrast to a nebulous risk of deflation - a dilemma of keenly divergent “relative prices.” Goods prices have been under moderate downward global pricing pressure, while U.S. homes, land, bonds, mortgages, sports franchises, and many “services” prices have been inflating rapidly. While expedient, any narrow focus by the Fed and Wall Street on “core CPI” patently misses the nature of diverse and aberrant Credit inflation that dominates contemporary monetary affairs.
Further, the nature of divergent pricing pressures is easily explained by the peculiarity of the deranged U.S. financial system (Monetary Processes). The Credit mechanism (bankers, investors, Wall Street, and the speculator community) has come to favor the inexhaustible volume and perceived (boom-time) safety of asset-based lending. So the grossest excesses mount in asset classes such as residential real estate and securities (agency bonds, mortgage-backs, etc.). We could drop money from legions of cargo helicopters, but it will quickly find its way into real estate, the bond market, and imported goods. The enormous amount of created purchasing power (money and Credit) required to trickle down to spur the real economy would only further destabilize (inflate Bubbles) asset markets and trade deficits. Today, in the aggregate, rampant money and Credit inflation runs unabated, although this monetary expansion could not be more uneven or destabilizing. But “this is totally different from the concept of deflation.” I would add that a market economy will not function effectively over the long-term with an uncontrolled Credit system and unrestrained speculation.
<ul> ~ http://www.prudentbear.com/creditbubblebulletin.asp</ul>
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