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Politics : Ask Michael Burke

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To: BGR who wrote (71423)	12/4/1999 9:40:00 AM
From: Mike M2	Read Replies (1) of 132070

BGR, very simple watch the trends in credit growth in relation to GDP. When the credit expansion has a reduced impact on GDP growth it reveals that the credit is being diverted away from productive enterprise into financing speculation in securities or real estate. Currently we have unprecedented credit expansion and unprecedented valuations in the stock market. I know you like numbers so here is some historical data on the bank credit required to generate a dollar of GDP 1921-3 0.33 ; 1925-9 0.62 ; 1926-9 1.00 now another source I have notes that in 1929 there was $2 of credit created for every dollar of GDP. Moving to the post war boom 1949-53 0.26 , 1954-7 , 0.32 1958-60 .26 1960-5 0.60 . For more historic perspective 1953-80 1.35; 1980-1.37 ; 1990 1.83; 1998 2.92 ; IN 4Q98 we hit an amazing FIVE- . No one suggests that there is a precise magic formula but the trends reveal an obvious correlation with credit growth and speculation in financial markets. The trends lead to TL & EV . One other ting ho ho ho ! Mike

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