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Politics : Formerly About Applied Materials
AMAT 262.31-1.2%10:18 AM EST
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To: Ramsey Su who wrote (22013)7/21/1998 4:18:00 PM
From: derek cao   of 70976
 
Ramsey,

Re: but do we actually have too much capacity in the box makers?

I have two possible answers. First, the main box production may lie in southeast aisa, all those box makers are mere marketing companys sell other companys' products. If there is a oversupply, the production companys will share the major burden of over capacity. Second, even if some box makers have their own production, the assembly job is not capital intensive and time consuming comparing to marketing,sales and component production. So if there is a over capacity, the box makers will not feel too much pain.

In order to have a stable economy, one must have production equal to consumption. Recession occurs when consumption outstrip production(which inflation) or production outgrow consumption(deflation). It is relatively easy to deal with inflation as long as the leadership of the country are determined to choke off lending(shrink the money supply). On the other hand, when deflation happens, it is possible that people's confidence are so shaken that they will NOT accept lending money even with zero interest. John H. Makin suggest to increase money supply as soon as you are sure there is a deflation going on. Otherwise it could be too late.

Derek
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