Contra Prechter - banshee
By: banshee on Venerdì 21 Febbraio 2003 13:48
altrimenti lo vedresti dall'inflazione
Ti incollo un pezzo che ho scritto qualche giorno fa, in risposta ad un'intervista di Prechter che mi aveva fatto girare gli attributi per la sua visione sull'oro e le commodities in generale.
Ti chiarirà le idee spero definitivamente su cos'è l'inflazione. Non è la prima volta che cerco di promuovere una sua corretta definizione, ma sarà l'ultima. Non tornerò più sull'argomento.
Se uno non capisce........ e vabbè, pazienza...... non capisce!
A big hallo to everybody.
This topic gives me the opportunity to comment about the Prechter's interview by Mr. Puplava, that I've just read.
Above all, I wish to address the parts of the Prechter's thoughts I don't feel comfortable with.
Mr. Prechter is right about the cause of the financial mess we're living today.
But when he comes to extrapolate the effect of that cause, I think he misses absolutely the point. And it seems to me he falls in the same misunderstanding of many others persons: a confusion of terms, which leads necessarily to a confusion of concepts.
In one of his article on this site, Mr. Picks explains very well what is inflation. Inflation is an increase of the money supply. Period! And I don't think there is a difference (as Mr. Prechter does) if this money supply comes in the form of credit or bank notes.
Therefore, as this money supply in the last years has risen wildly (and it's accelerating), we are in an inflationary environment. I guess we are in this one since fiat money came in this world.
Another thing is to address the effect about the prices in this environment. Doing so, permit me to ignore the CPI, cause I don't have time to waste with non-sense.
Addressing that effect, you will see prices down in all those assets which have known even major inflation than money supply in the past, in the form of price's rise or in the form of overproduction, or in a mix of both forms. So, you will see a decline of the prices of stocks, houses, PCs, DVDs and almost every electronic item, cars. You will see a decline in the prices of bonds too, even if the FED monetizes debt. It's impossible that the FED can monetize every cent of the mountain of debt States have now at every level, and the implosion of that debt will surely overcome the bail-outs which will occur towards major players. And it's impossible that the FED can be the substitute for every foreigner who will not buy anymore Treasuries, and opposite will sell Treasuries he's got now.
On the other side, you'll see a rise in the prices of essential goods and services (think about food, insurance, health care, fuel), of every good which production is not possible to implement in a day or a week, or is not possible to produce by China or Vietnam, of every governmental or paragovernmental or simulgovernmental tax (not income tax) or tariff.
And you'll see a rise in the prices of commodities. Every commodity, but above all metals and minerals, much more difficult to get than agricoltural products. You will see their prices point north because they have been always lower in the past years, while we could witness an orgy of money supply in the sistem. In many cases, they have been lower in an artificial way (a real scandal in the case of silver), but lower anyway.
For these reason I think Mr. Prechter makes a big mistake addressing the effects on the price of gold, silver, oil, gas, but even agricoltural products.
And it's misleading to look back at what happened in the Great Depression to understand what could happen today. The cause may very well be the same, but the effects will be quite different today, as I see it.
Like it is well said in the precedent post, then dollar was the king just because behind it there was gold, not air like today. And many other things are different today: US is not anymore a producer and a creditor like it was then, and it's much more depending on import about its energetic needs. Besides, then it was not on the verge of a war.
Modificato da - banshee on 2/21/2003 12:50:49