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Strategies & Market Trends : Sharck Soup

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To: GREENLAW4-7 who wrote (23284)	5/16/2001 6:37:16 PM
From: cthd	Read Replies (1) of 37746

Why Bubble #2 is already here: AG pumped an amazing amount of money into the economy as a hedge against Y2K liquidity fear. M3 (all monies in U.S.)rose by 15% during that January period of 2000. Although I don't disagree with his prudence, but the fact of the matter remains that his monetary policy created an overabundance of money supply in the economy. The effects of the increased money supply made it easier for corporations to borrow and to increase production/supply/inventory even as demand was showing signs of slowing. What we have today is a consumer that has overspent and is in bigger debt now and corporations that have borrowed too heavily or given out too much credit and is now facing the financial realities of supply and demand. AG has already cut rates 5 times this year. "Don't fight the Fed" say many market participants. Historically, I agree that it hasn't been wise to fight the Fed when it aggressively lowers (or increase) rates. Through a shift in monetary policy, AG has increased M3 by roughly 30% over the past few months in a attempt to bail out corporations that should have planned ahead of the economic slowdown. AG is rewarding oversupply and poor management. Capital spending is a natural process based on "need" and can't be jump started again simply by interest rate reductions. If the current supply of routers is sufficient to meet demand.... lowering rates to stimulate demand when demand is already at its optimal level is like asking someone who already had 4 Big Macs for lunch to buy 4 more now because Mickey D's lowered their price to $0.99. AG has been in panic reduction mode .... and is risking another bubble along with the complexities of inflation in the near future. Sometimes, the market loses whether or not it fights the FED. CTHD

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