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Politics : Ask Michael Burke
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To: valueminded who wrote (64557)7/15/1999 10:36:00 AM
From: Mike M2  Read Replies (1) of 132070
 
Chris, I question the $ 6 trillion dollar figure for money markets. I seem to recall home equity being near record lows. People like to refinance and tap into the inflation of housing prices ( notwithstanding Wall St.'s mantra no inflation) I don't have sources handy at the moment. With respect to your question about a spike in rates and crashes rates usually rise but I don't know if I would call it a spike. The post war pattern for the stock market has been for the Fed to raise rates to contain product price inflation. AG 's pattern has been to spike the punch bowel rather than take it away. The biggest bubbles of this century Japan in the 80s, US in the 20's, and the present mania occurred in the absence of product price inflation which leads the central banks to excess monetary ease. The outlet for the monetary inflation was and is the financial markets. I do not see central bank tightening as a prerequisite to burst a bubble. South East Asia burst w/out central bank tightening. If the speculative orgy is left to its own devices it will eventually implode due to excessive leverage and the credit markets will take rates up. I would like to emphasize the Austrian view that economic or financial crises are the result of imbalances creates by excessive monetary ease. higher rates are a symptom not a cause. Once a bubble bursts like US in the 20's or Japan in the 80s the economy and markets will not respond to monetary ease until the excesses are liquidated. The current policies of bail outs have been very effective at buying time but at the price of greater excesses which will deepen and prolong the next inevitable slump. Mike forever bearish HO HO HO
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