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Politics : Ask Michael Burke

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To: Knighty Tin who wrote (61740)	6/8/1999 6:49:00 PM
From: Freedom Fighter	Read Replies (2) of 132070

Mike, I agree that there's a close connection between our "real rates" and foreign demand for our bonds/bills. But I think it could work in reverse also. We are so savings starved that we have become very dependent on foreign inflows to keep "real rates" at an even reasonable level. Inflows have already been huge for the last few years now. It's possible that the current large credit requirements in this country combined with the total lack of personal domestic savings and the growing current account deficit require such enormous foreign demand that the dollar might start wobbling even as rates rise. There are limits to foreign savings too and if bonds keep retreating foreign holder's losses start piling up. This is a complex issue and I am not sure I have a full understanding but I know I don't like what I see. Wayne

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