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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Mark Adams who wrote (137805)	12/8/2001 7:40:49 PM
From: GraceZ	Read Replies (1) of 436258

Just as a surge in oil contributed to the current slowdown, and fostered an acceleration of inflation off the artificial low post 98. Perhaps OPEC 'helped' with the Asian crisis resolution by responding slower than supply/demand would suggest. I having trouble understanding what you are saying in the above sentences. When you say "surge in oil" are you referring to the surge in demand or the surge in prices? One followed the other. Demand rose coming out of the Asian crisis and then prices surged which then had a dampening effect on the economy. A rise in the price in oil is equivalent to a rise in taxes or interest rates, it tends to slow down the economy. You don't subscribe to the idea that the FED has lost control of the ultimate size of the credit pool to the likes of asset backed securities? The FED can only make money available, the FED can't control where that money goes. That much should be absolutely clear to anyone who has been watching the economy for the last three years. While the FED was lowering rates and added to the reserves, C&I loans have been contracting while commercial paper grew (and is now contracting) and corporate bonds issues grew and are still growing. There's a significant difference between money that is borrowed for productive assets (C&I loans) and that which is used for operations (commercial paper) and corporate bonds. Right now the corporate bonds are being issued to replace commercial paper which is failing below a grade needed to be bought by money funds. This is the worst kind of borrowing, it doesn't go into growing the company or the economy. The contraction in C&I indicates that either the banks are tightening lending standards or that corporations don't see any return in investing in productive assets. They are simply restructuring debt or borrowing to cover losses from operations! Thus far most bets I've made on the dollar falling have failed to perform. Are there any dollar bears left? finance.lycos.com The dollar peaked in July, if it fails to rally back up to 120 or even 118, one would be justified in thinking it has broken it's uptrend. This remains to be seen. Bets fail until they don't. If you want to be humbled, one only need make a bet on where a currency will go in the future. All I know is that if it falls then we will be faced with a rise in the cost of imports at a time when the trade deficit is at an all time high.

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