I to am a Coxe fan for about 2 years. The point he makes
about doing what he does since 1972 is very important. There
are very few people that are still in our industry that navigated
through inflationary times. Most people have gained there
experience in a disinflationary enviornment. I liken the 70s
with the US baby boomers entering their demand years to the world
baby boom demand we see today. Coxe made a point about 4
years ago ( at least, I think it was Coxe) that " If everybody in
China wanted to live the same lifestyle that we do in the US, it
would take the natural resources of 4 worlds to accomplish
this.
Yes, I agree with you that it looks so much like the 70s, only
the scale is bigger, a perfect Deja Vu, or maybe too perfect a Deja
Vu?
I would like to see technical evidence of a resumption of the
uptrend in commodities, Oil, I believe is the key to that door
with unlimited capital, it might be easy to ride out storms, for
mere mortals like me, that is not an option, I'll go underground
and wait for the gale to stop howling. It's a balancing act,
and so different from one individual case to anothe
In the
70'sthe U.S. suffered from soaring inflation, by
U.S. standards, along with stagnation -- thus the term stagflation
was attached to it. The soaring inflation had two primary
components: asset (commodity) inflation and wage
inflation. The commodity inflation was caused by two primary
factors: the OPEC cartel clamping down on production in
order to drive up prices and inflation hedging.
The current commodity inflation has a different primary
cause. It has primarily been caused by demand
growth (rather than by an orchestrated constraint on supplies),
largely from very strong growth within
emerging economies, putting severe constraints on excess
supply capacity.
Also, the current situation does not have a wage inflation
problem. U.S. workers power to negotiate for higher
wages has severely diminished since the 70's primarily as a
result of the much smaller percentage of unionized
workers, and the loss of strength by unions, and because of
increased competition as a result of outsourcing and technological
advances such as the internet and other info technologies.
The challenges the current economy is going through are
more akin to the
1930's. The challenges then, like now,
were primarily caused by the prior buildup of a massive credit/debt
(depending on which side your looking from) bubble. That
does not necessarily mean that the U.S. is headed into a
depression, as occurred in the 1930s. The situation in the
1930s, and similarly in Japan in the 1990s, was
badly exacerbated by some very poor economic policies by the
government, at least according to most economists.
Hopefully, the challenges of deleveraging our economy, i.e.
unwinding the excessive credit and debt levels, have been and
will continue to be handled better than then. Bernanke is one
of the world's leading authorities on the U.S. depression of the
1930s, perhaps the top authority on it. He has been very
aggressive and creative in fighting the credit crisis so far.
I think it is fair to say that most who saw the enormity of
the growing credit crisis a year or more ago expected the
economy and equity markets to suffer much more severely by now
than they actually have. As it now stands now more than a
year after the broad based U.S. indices started putting in
their bull market tops, led by the midcap and smallcap
indices, equities have only suffered a very mild bear
market and the economy a very mild recession. How much worse,
if at all, it gets remains to be
seen.
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I to am a Coxe
gold
Posted by ralph on 16th of Aug 2008 at 10:56 am
I to am a Coxe fan for about 2 years. The point he makes about doing what he does since 1972 is very important. There are very few people that are still in our industry that navigated through inflationary times. Most people have gained there experience in a disinflationary enviornment. I liken the 70s with the US baby boomers entering their demand years to the world baby boom demand we see today. Coxe made a point about 4 years ago ( at least, I think it was Coxe) that " If everybody in China wanted to live the same lifestyle that we do in the US, it would take the natural resources of 4 worlds to accomplish this.
Yes, I agree with you
Posted by googool on 16th of Aug 2008 at 11:13 am
Yes, I agree with you that it looks so much like the 70s, only the scale is bigger, a perfect Deja Vu, or maybe too perfect a Deja Vu?
I would like to see technical evidence of a resumption of the uptrend in commodities, Oil, I believe is the key to that door
with unlimited capital, it might be easy to ride out storms, for mere mortals like me, that is not an option, I'll go underground and wait for the gale to stop howling. It's a balancing act, and so different from one individual case to anothe
In the 70'sthe U.S. suffered
Posted by martin on 16th of Aug 2008 at 08:04 pm
In the 70'sthe U.S. suffered from soaring inflation, by U.S. standards, along with stagnation -- thus the term stagflation was attached to it. The soaring inflation had two primary components: asset (commodity) inflation and wage inflation. The commodity inflation was caused by two primary factors: the OPEC cartel clamping down on production in order to drive up prices and inflation hedging.
The current commodity inflation has a different primary cause. It has primarily been caused by demand growth (rather than by an orchestrated constraint on supplies), largely from very strong growth within emerging economies, putting severe constraints on excess supply capacity.
Also, the current situation does not have a wage inflation problem. U.S. workers power to negotiate for higher wages has severely diminished since the 70's primarily as a result of the much smaller percentage of unionized workers, and the loss of strength by unions, and because of increased competition as a result of outsourcing and technological advances such as the internet and other info technologies.
The challenges the current economy is going through are more akin to the 1930's. The challenges then, like now, were primarily caused by the prior buildup of a massive credit/debt (depending on which side your looking from) bubble. That does not necessarily mean that the U.S. is headed into a depression, as occurred in the 1930s. The situation in the 1930s, and similarly in Japan in the 1990s, was badly exacerbated by some very poor economic policies by the government, at least according to most economists. Hopefully, the challenges of deleveraging our economy, i.e. unwinding the excessive credit and debt levels, have been and will continue to be handled better than then. Bernanke is one of the world's leading authorities on the U.S. depression of the 1930s, perhaps the top authority on it. He has been very aggressive and creative in fighting the credit crisis so far. I think it is fair to say that most who saw the enormity of the growing credit crisis a year or more ago expected the economy and equity markets to suffer much more severely by now than they actually have. As it now stands now more than a year after the broad based U.S. indices started putting in their bull market tops, led by the midcap and smallcap indices, equities have only suffered a very mild bear market and the economy a very mild recession. How much worse, if at all, it gets remains to be seen.