global recession/deflation forum

[Stephen A. Bloom]

my contention is that we are inexorably heading for global deflation
with little room for action to re-inflate our way out of it. How about
some reasoned views for or against the following(& anything relevant
I've left out):
1/recent excesses mark the end of a multi-decade rise of capacity
overbuild, greed & irrationality from which the world will take
multi-decades to recover.
2/P.E. ratios in the U.S. of around 40 are clearly still too high,even
after recent excesses. I would like someone to tell me what multiple
$1 of earnings growing at 10% is worth(& why) with inflation at: a/10%,
b/5%,c/0%, & d/-5%. With pro-forma accounting now the new norm,what are
these earnings anyway?
3/Inflationary peaks in the 1970's meant we have been fighting the wrong
battle for the last decade - deflationary forces were ignored to the
point where it it is now too late to correct the imbalances. Sept.11 just
telescoped the process.
4/Europe is still ossified with high unemployment, rising deficits & the
wrong interest rates - no global locomotive here.
5/Japan is the primary clear example of where a multi-decade rise to
madness leads & is key to what happens next as it's getting there way
before anyone else.
6/Interst-rate reductions will have less & less effect(see Japan).
Just how much incentive can you build into another 1 3/4% cut?
7/Budget deficit increases will slow the rate of decline into
deflation,but will not change the direction.
8/A falling $ is helpful for the U.S. but nobody else, so is a net
negative (even if inevitable).
9/Pension funds are suffering & with demographics will lead to more
saving(as in Japan)& less spending.House price falls will exacerbate
the spending retrenchment.
10/Naked(at last down to the dirty bit!)re-inflation will eventually
lead to further deflation as long-term rates rise dramatically.
Runaway inflation may be the final result, leading to economic
implosion & new currencies - but based on what? (please,not gold !)
cheers!
stevie b.