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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 675.02

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Nov 25 4:00 PM EST

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To: TimbaBear who wrote (20999)	7/24/1999 12:59:00 PM
From: Casaubon	Read Replies (2) of 99985

If the Government uses its "surplus" to pay down debt, then it doesn't have to borrow as much from the private sector which means the private sector has more supply that they have to find other sources to sell to and that puts them in competition with the other sources of supply already selling money in those sectors and this will drive down the cost of money (interest rates) for all of us until supply and demand reach equilibrium again. Sorry, I got lost in the construction of your argument. IMO, as the Gov't pays down debt, the supply of debt decreases, thereby creating pricing pressure on other sources of debt(such as corporate issuances). This "undersupply" of debt causes a reduction in interest rates for the new debt issuances ( more money will be chasing fewer offerings). This should be good for corporate america, as they will be able to borrow money (from investors) at lower costs. And, good for the average investor, as low interest rate environments are conducive to growth, not to mention the outright savings on taxpayers burden of supporting the debts finance charges. I think we are in agreement, no?

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