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Politics : Ask Michael Burke
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To: Knighty Tin who wrote (74934)1/31/2000 3:14:00 PM
From: Mike M2  Read Replies (2) of 132070
 
mike, whatever kind of 'flation we get it will be followed by TL & EV ho ho ho. When the bubble finally bursts I figure that the forces of negative wealth effect, heavily indebted consumers see the value of their assets fall ( stocks & real estate) while the debt is still there will diminish the American consumers consumption binge. The aftermath- rising defaults, delinquencies, and reduced demand for new debt - all conditions for deflation ( a contraction of credit) should more than offset the Fed's monetary inflation and the price inflation of imported goods due to the inevitable decline in the value of the US dollar. The case for stagflation is a good one because the Fed will try to inflate their way out of the next decline but I feel that effectiveness will be greatly diminished due to the current monumental excesses. In short, the Fed used up most of its ammo by perpetuating the bubble and trying to save the world economy. Mike
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