In response to Alan Scharf
Thanks, Alan, that was very insightful and your right, in my complaint
about the discrepancy I forgot/did not know/wanted to draw attention to a
different viewpoint. However, you are right, one is apples and the other
is oranges. However at some level their has to be a connection as the
majority of people pay their rent through employment, not investment.
I was also struck yesterday by the lengthy post of Arthur Cordell:
Thanks to a building binge throughout Asia, continuing economic
expansion in the U.S., and recovering economies in Europe, production
everywhere is running ahead of consumption. That's even true in the U.S.,
where consumer demand remains strong (chart, page 58). Today, for the
first time in years, there is worldwide overcapacity in industries, from
semiconductors to autos. And the excess supply will get even worse as
Asia tries to export its way out of trouble.
The result: The global economy may well be heading into a new era--
an era of deflation. Prices for goods are falling or stagnant around the
world. In the U.S., industries with stable or falling wholesale prices
account for two-thirds of manufacturing production. And in many parts of
the world, such as Japan, overall goods prices have been falling (chart,
page 59). ''Fundamentally, something has changed in the economy,'' says
John F. Smith Jr., chairman and CEO of General Motors Corp. ''In today's
age, you cannot get price increases.''
If the economy is overproductive in regards to consumption, the question is
why? Is it shortages of consumer dollars or consumer needs? And what
happens if continuing bumps keep hitting the stock market so that investor
income falls in the same manner of employment income. Is this the final
start of capitalism's meltdown?
Anyway, thanks for your good answer Alan.
Respectfully,
Thomas Lunde
