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Not Important? Think Again - 2 July 2002

Not Important? Think Again

An occasional news bulletin from Sanders Research Associates

Tuesday, 2 July 2002

Inflation, International Criminal Court, and Cyberwar: just another day in the life of …. Bushman

The housing boom rolls on…

We have been saying for some time that the housing markets in the UK and the US have got real legs. It is true that prices are high, if not stupid. But with monetary policy in both countries on hold, interest rates very low, and monetary policy accommodative, housing is still “affordable,” and inventories of unsold homes are low.,1456,747179,00.html

The intellectual groundwork for a return of inflation is in place…

One of the reasons that we think what we do about housing is that the major central banks are intent on getting global inflation higher. Considering that it took nearly 15 years to get the inflation rate down, it is taking a while to get it to start climbing significantly again. The reason for this policy shift is to be found in the nature of the international dollar reserve system itself, which institutionally and intellectually is a system for managing the inflation rate, not for preserving the value of money. A commitment to raise the inflation rate is tantamount to a commitment to raise the rate at which we discount future earnings. This is another way to say that present values of future earnings streams are too high. You can see for yourself “state of the art” thinking at the Federal Reserve, which finds echoes on the other side of the Atlantic in Britain.

And attitudes toward inflation are not the only thing changing…

The debacle at France Telecom has resulted in its bonds collapsing. Considering that the French government is the biggest shareholder, this is quite a statement. Although the announcement that they were considering renationalisation was quickly denied after the shorts had been unmercifully squeezed, it rings true.

Just look at Britain if you don’t think so…

Speaking of debacles, Britain has managed to not only prove that it cannot operate a public good like the railway system, but has managed to spend a lot of money doing it. At least Enron was not a public utility. The British public, especially the investing public, has been remarkably quiescent about the Railtrack affair, which comes nowhere near passing the smell test.

The Bush administration continues to put the wrong foot forward…

American opposition to the International Criminal Court is so intransigent that it makes you wonder just how much they have to hide. And the ICC symbol (presumably that is the symbol a the head of this article) looks a lot like an Israeli flag. Hmmm…

And Bush is doing such a good job of it, why stop now?

Even in Britain, playing Ukraine to America’s USSR as Noam Chomsky unforgettably quipped, even those who are inclined to support the US are having second thoughts. Bush ought to worry, but hey, what the heck.

Why indeed, when the propaganda machine is going so strong?

They have brought us exploding frogmen, balloonists and now, cyber war. Imagine all those Islamic terrorists, sipping strong coffee in their local Hindu Kush internet café, launching devastating attacks on the computers of the free world….Don’t worry, Bill Gates has undoubtedly got the product you need.

- Not Important? Think Again - 4 June 2002



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