Two Must read interviews, Inflation and Deflation

I feel the following two interviews are requireed reading, one is by Jeremy Grantham, titled This Credit Crisis Has a Long Way to Run in Barrons.

And the other is by David Rosenberg of Merrill Lynch, titled Where next for the US economy? in FT.

These two interviews give a very good view of what most likely is to happen. The entire US Credit Market problem can boiled to into a simple statement and here it is :

Available Income, is not enough to service the Outstanding DEBT.

Hence the Debt has to be destroyed and the debt destruction is DEFLATIONARY. It is as simple as that, also remember as the economy starts weakening, there will be less demand for lot of things, especially descretionary items. This can explains why Wal-Mart will be fine, but other retailers will be in a world of hurt.

It is on this basis, the demand for Crude also comes down, even though Crude trades many times on things other than demand. I expect Crude to come down to somewhere 60 to 70 Dollars a barrel by May, even though Driving season is ahead, in other words the consumption of crude will come down.

With USA, Eurpope, Japan in recession, the idea that China and India, will keep the world going is a big joke. Do not let anyone fool you in this regard.

The recent data which showed their is inflation in the system, is A LAGGING INDICATOR, and is not forward looking.

Notwithstanding the lies supply-siders talk about tax-cuts it is actually the availability of easy credit thats what caused the boom of last 4 years. Hence with the Credit contraction, the effects going to be far longer than lot of people understand. Right now, that only thing that resolve all the issues pertaining to Credit and Bank problems is time. Unless Fed Govt., tries to Nationalize the entire housing market. Which is always a possibility...........

Thanks for Reading