lets hope mfgs dont. the last thing we need to see is price deflation becoming more commonplace.
and fwiw, i don't think we'll end up there. the obama housing plan is a pretty good one (though arguably its too early to introduce as prices are still too high vs rents / incomes), and clinton just went and secured a commitment from our bankers (CHN) to continue buying our debt, so back of yield curve should be supported w/o bernanke monetizing it. Shadorne noted Libor spreads are much better, Fed's B/S is coming down and the commerical paper mkt is easing.
i think volker is behind the curve. the reason for the massive global collapse in output is the saving grace here to preclude a depression: IT. w/ visibility throughout the supply chain, producers dynamically adjust output to reflect slowing sales...the INV / Sales ratio for Q4 ticked up a little, but if this were 1980 we'd see a depression as inventory would've exploded, prices collapse, deathspiral. but w/ integrated supply chain, we see rapid adjustment in factors of output, easier to work off inventories, and prices should be maintained.
(niche audio producers routinely operate w/ a backlog; i'm inclined to think they'll live leaner, but live. but of course, some will die, particularly the dealers. audiogon will help kill a lot of them, as audiophiles w/ jobs will keep spending as there's a psychological dimension to this hobby that keeps most on the merry go round, but the negative wealth effect will cause more judicious use of budgets---used gear will move, new gear will be tough to go.)
this was a global collapse b/c of the securitization mkt (america's preeminent export) and leverage, and now we're in a deleveraging cycle (which is very bad). industries that depend on leverage (autos, real estate, banking) are in deep trouble for a while, but other sectors will likely hold up (luxury goods at greatest risk of course per negative wealth effect). the B/S repair of the consumer of last resort (US) is a primary concern...if we see retail sales keep posting ok #s (jan was great, feb?), and unemployment doesn't spike 10+%, we'll be positive GDP by Q4, maybe Q3. if we see retail sales retrench & / or unemployment spikes, i'll feel much differently.
equity mkts have diff issues; they're not going to do a thing until non-US sovereign debt and corp debt yield spreads come in. 6-handle on the Dow is likely. and so is 9-handle (lots of cash on the sidelines. lots). key thing to watch for is when bernanke wins in weakening the USD vs LatAm & SEAsia currencies...then we'll see what i refer to as the 'bifurcation of inflation.' think core vs food/energy, and it will all come together.
frankly, i think the global element could work off w/ speed that surprises everyone. but i won't be surprised to see the US experience sub 3% growth for years...but its still growth in a mature mkt, and it'll be a good thing.
btw, anyone complaining about illegals is misguided. illegals are a drain on state & federal resources, but they're the disinflationary force that, along w/ CHN debt buying, kept you living high hog for years.
and fwiw, i don't think we'll end up there. the obama housing plan is a pretty good one (though arguably its too early to introduce as prices are still too high vs rents / incomes), and clinton just went and secured a commitment from our bankers (CHN) to continue buying our debt, so back of yield curve should be supported w/o bernanke monetizing it. Shadorne noted Libor spreads are much better, Fed's B/S is coming down and the commerical paper mkt is easing.
i think volker is behind the curve. the reason for the massive global collapse in output is the saving grace here to preclude a depression: IT. w/ visibility throughout the supply chain, producers dynamically adjust output to reflect slowing sales...the INV / Sales ratio for Q4 ticked up a little, but if this were 1980 we'd see a depression as inventory would've exploded, prices collapse, deathspiral. but w/ integrated supply chain, we see rapid adjustment in factors of output, easier to work off inventories, and prices should be maintained.
(niche audio producers routinely operate w/ a backlog; i'm inclined to think they'll live leaner, but live. but of course, some will die, particularly the dealers. audiogon will help kill a lot of them, as audiophiles w/ jobs will keep spending as there's a psychological dimension to this hobby that keeps most on the merry go round, but the negative wealth effect will cause more judicious use of budgets---used gear will move, new gear will be tough to go.)
this was a global collapse b/c of the securitization mkt (america's preeminent export) and leverage, and now we're in a deleveraging cycle (which is very bad). industries that depend on leverage (autos, real estate, banking) are in deep trouble for a while, but other sectors will likely hold up (luxury goods at greatest risk of course per negative wealth effect). the B/S repair of the consumer of last resort (US) is a primary concern...if we see retail sales keep posting ok #s (jan was great, feb?), and unemployment doesn't spike 10+%, we'll be positive GDP by Q4, maybe Q3. if we see retail sales retrench & / or unemployment spikes, i'll feel much differently.
equity mkts have diff issues; they're not going to do a thing until non-US sovereign debt and corp debt yield spreads come in. 6-handle on the Dow is likely. and so is 9-handle (lots of cash on the sidelines. lots). key thing to watch for is when bernanke wins in weakening the USD vs LatAm & SEAsia currencies...then we'll see what i refer to as the 'bifurcation of inflation.' think core vs food/energy, and it will all come together.
frankly, i think the global element could work off w/ speed that surprises everyone. but i won't be surprised to see the US experience sub 3% growth for years...but its still growth in a mature mkt, and it'll be a good thing.
btw, anyone complaining about illegals is misguided. illegals are a drain on state & federal resources, but they're the disinflationary force that, along w/ CHN debt buying, kept you living high hog for years.