----- Original Message ----- From: "Geoff Flight" <[EMAIL PROTECTED]> To: "'ProFox Email List'" <[email protected]> Sent: Monday, December 01, 2008 5:44 PM Subject: RE: [OT] How to determine if a market has hit THE bottom.
There are a number of assumptions implicit in that scenario. Let's see if you can identify them. It makes ZERO mention of the wage/inflation comparison and absurdly assumes they are equal. History shows that in times of high inflation (eg 80s/90s) wages failed to keep up with inflation. It also makes ZERO mention of the asset price change over time once again making the infantile assumption that the asset appreciates over time at the same rate as the interest rate. One would have thought the current financial crisis would have made you loathe to quote this garbage. (Yes I know it is a text book - that doesn't stop it from being simplistic or downright wrong). The current American economy has high-ish inflation but at the same time it has plummeting house prices. You don't see anyone boasting about how borrowers are being benefited. And at the same time, wage rises are failing to keep up with inflation and the next year wil be even worse. And to repeat a basic tenet of borrowing is that you 'lose' if the interest rate exceeds the rate of appreciation of the asset (inflation). Economics is barely a science. Current events are disproving much of their 'theory'. Geoff, You are continuously expanding the model to make your point. Stick to the original concept of someone borrowing money at some fixed interest rate. If you want the model to run over all kinds of events following this loan then go ahead but it doesn't change the original facts. The borrower always makes out better in inflation on that loan. Whatever happens afterwards has no bearing on it. In fact how can all these following events you mention be written into the loan contract; no one can predict the future that precisely. _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[EMAIL PROTECTED] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
