Thursday, March 20, 2008

The bubbles are popping

Just looking across various markets in our wonderful economy as well as housing it strikes me that it's all over priced. If you factor in inflation none of this 'stuff' should cost what it does. Gas should not be headed to $4 a gallon. Gold should not have gone over $1000 an oz. And housing was getting close to what it was in Tokyo back in the 80's. I have seen and actually worked on a condo conversion some time back that I would consider obscene. A two bedroom one bath 600 sq ft place going for (takes a hard swallow) 1/2 million dollars and that was over ten years ago! Now they are going for something like 1.2 million althought the prices are dropping somewhat here but not like the rest of the country.
So it makes me wonder are we headed for massive inflation or deflation in the months ahead? On the one hand the government is throwing buckets of money at the problem and that causes inflation. On the other hand when prices get too high people stop buying and that causes deflation. Add to that the losses to equity and it's anyone's guess as to where we'll end up. So we either end up with stagflation or deflation neither of which is pretty on the pocketbook.

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