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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: UnBelievable who wrote (15784)9/5/2000 9:14:35 AM
From: pater tenebrarum  Read Replies (4) of 436258
 
let's put it this way: t/a is much more useful to trade an obvious bubble than f/a can possibly be. however, the strength of the US economy is built on an enormous amount of debt. its continued strength (and with it the continued inflation of the financial assets bubble) hinges mainly on the ability to expand this debt at ever increasing rates.
imo it is pretty clear that there is a limit to this. it seems that in order to sustain the whole shebang debt must grow about five times faster than the economy itself (which has been the case since the bubble actually began, i.e. '95). therefore this is the only fundamental factor that should concern us: money supply growth must remain at an annualized rate of about 10-15% without igniting inflation in goods and services to a degree that can't even be covered up by the BLS anymore, to enable the bubble to keep on bubbling.
the funding of the debt driving all this depends in turn on the continued willingness of foreign economies to export their savings...as no savings are available domestically.
therefore stronger overseas economies are indeed dangerous for the bubble's health, as the competition for capital intensifies. consequently a small scale interest rate bidding war has already commenced. also, the increasing strain on scarce natural resources is becoming glaringly obvious, as the rally in energy prices and the plunge in LME metal inventories show.
in other words, we are probably close to the point where the bill for the up until now free lunch will be presented.
btw, the above points are not part of mainstream economic analysis...that seems to concern itself mostly with looking for shades that are dark enough to shield our eyes from the brightness of the future. the dangerous imbalances are not even part of the Fed chairman's vocabulary anymore....complacency rules.
one last thing: if it were not possible to fool a great many people for long periods of time, the Nikkei would have never reached 40,000...
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