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Earl-
Tks for this post. Iv'e read a lot
about what the Austrial School refers to as "unproductive investment" but
Hussman
explains the meaning very clearly. Tks for
his clarification. The Austrians talk about it a lot but hats off the
Hussman for
explaining very clearly the
meaning.
Chas
----- Original Message -----
Sent: Monday, September 19, 2005 8:46
AM
Subject: [RT] Hussman on inflation
My impression is that the market's interpretation of inflation risks
here, seen most clearly in the surge in gold prices, is basically correct. As
I've long noted, inflation essentially reflects expansion in unproductive
government spending. “Unproductive” in this sense doesn't refer to the social
value of that spending, but the likelihood that it will add to productive capacity of the economy that did not
previously exist and would not have existed if the funds were invested
otherwise. If disasters were good for the economy, then we'd see a city
rebuilt every year. Unfortunately, disasters cause economic disruptions, and
rebuilding replaces rather than adds to productive capacity. Sure,
some things will be rebuilt better than before, but those benefits are likely
to be overwhelmed by the disruptions, not only in economic activity, shipping,
and so forth, but in the natural resources markets. It's clear that some of
the greatest demand impacts from Katrina will be on commodities such as
lumber, oil and other real goods. In short, my impression is that the markets
are correct and not nearly complete in responding to the inflationary
potential of a government that promises hundreds of billions of dollars in
real goods and services without the means to pay for them.
emphasis in red is mine
Earl
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