[quote]JEATON wrote:
[quote]handlebar wrote:
Jeaton’
What you described in your earlier post about deflation reminds me of Janzen’s KAPOOM theroy. I am right in saying this?[/quote]
I do not know. I have neither heard of the name or the theory before. I will google it later and see what it is about. [/quote]
The above is an interview that is apparently with the Janzen gentleman you mentioned. He is Australian, and like any good American, I am unaware of thought outside of the good 'ole USA.
Seriously, I have not come across him before. He seems to be coming at the problem from the opposite side of the same coin. I will have to think on it a little deeper, but I would say that our thought is very similar. What I think he is saying is that, because of fractional lending, easy money/low rates, and the reliance on monetary velocity, that the level of debt has been rising approx 4.5% faster than GDP every year since the mid sixties. Instead of address it, monetary policy has been trying to outrun it for almost fifty years. This has caused credit bubbles at an increasing frequency, to the point that we are near or at a point that virtually guarantees a 1930’s like depression. This runaway asset and debt inflation will eventually if not immediately have to undergo a long period of deflation to correct the imbalance.
As for me, I became interested in the workings of the economy in the mid and late nineties, leading up to the creation and popping of the tech bubble. So many things just did not make sense to me about that time. The explosion of the telecommunications infrastructure to the point that some fund managers (like Cramer) were constantly checking on sand supplies to see if fiber optics companies could keep up with the demand. Equally insane, was the creation of EBITA (earnings before the deduction of interest, taxes and amortization expenses). In other words, analyst were rating companies on the idea of how much money that WOULD HAVE MADE if they had had free money, no taxes and no depreciation of assets, and then giving them enourmas multiples based on this outrageous number. I started studying the markets, and the more I learned, the less sense it all made.
A few years later I ran across a man named Robert Prechter, Jr. He is one of those guys that people either think is a genius or a complete imbecile. He is an expert on Elliot Wave Theory that is a type of charting analysis. It uses everything from fractal geometry to mass nested cycles of optimism and pessimism that eventually blow off in manias. Fascinating stuff, but not really relevant to this conversation, except that he was a student of historical manias and the subsequent crashes that ALWAYS follow them. This lead me to other authors and studies, but I always seem to go back to Prechter on a macro view.
Anywho…
My ideas have varied and many sources, but I would say that Prechter has an amazing intellect and has had a large influence on me.
He has a book out called “Conquer the Crash.” It is in its second edition, and I would recommend it to everyone. Although he might briefly mention Elliot wave theory, the book stands on its own and probably explains the mechanics of deflation better than any other source I have ever come across.