Used car prices continued to rise (search for alpha)

Search for alpha var sector_slug = "transport". 8 comments |  by: Calafia Beach Market 10 December 2010 email

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The rise in car prices - with temporary setbacks due to recessions - trauma course is remarkable, especially since so many seem to assume that the high level of unemployment and huge "resources soft" quantity of economy (GDP runs about 10% below the level of its trend of employment, by my calculations) be virtually impossible to inflation or deflation something to worry about.

I remain convinced that inflation is a monetary phenomenon and has nothing to do with the soft resource or the unemployment rate. What price there are down - especially housing-related--are simply evidence that the economy is still in the process of transferring resources sectors (e.g. construction and housing, where there were clearly over-building areas) to another (e.g., mineral extraction, which is flourishing these days because the world economy is booming and monetary policies are accommodating).

This change is a change in relative prices comparable and reported. Lower prices of real estate, rising prices of raw materials; people leave the construction sector and move to the mining sector as a result. If the price of the car to continue to rise like this, soon enough it will be obvious that there is a shortage of new cars produced. Look for more robust gains new sales of cars and production in the months and years to come.

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Scott Grannis has been Chief Economist from 1989 to 2007 Western Asset Management company, a Pasadena-income funds database manager fixed for institutional investors worldwide. He has been member of the Board of Western investment strategy, was responsible for developing the company inside and... More
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