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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: UnBelievable who wrote (53710)	1/4/2001 9:15:06 AM
From: flyboy	Read Replies (3) of 436258

While you may well disagree with the point I can back it up. public.wsj.com Lets use T for an example. Since the company finances roughly $63B in debt and a majority of that debt is financed on a 30 to 90 day basis a 1 1/2% interest rate move forward has caused S&P to lower the credit rating on the company... With the increased pressure put by real rates rising and the rate being higher it results in a credit squeeze…FTU and BAC service the debt for T so if T were to become insolvent the burden would also be shared by these 2 banks…Not only would these creditors be significantly hit but also their customers…Because of one failure the real price of services from these institutions WOULD NEED TO BE RAISED in order to offset this loss…T has recently been forced to raise cable rates by 5% already to lessen the effects of the credit squeeze actually causing inflation by said amount with no change in service…Additionally there has been a tightening of monetary policy by the rates increases by the FED in the last 2 years…This is only one example but points to the risk that raising interest rates has put our corporations at risk…The reason that we did not have inflation during previous years under looser monetary policy is that productivity gains were able to overcome the looser monetary policy (not unlike Japan) as I had used in my earlier example… The tightening of funds has caused a sharp decrease in productivity as new technology has seen available capital diminish substantially…In order to cause a soft landing a rate cut was IMO necessary to prevent institutional failures and real inflation… As a sidebar to the whole increase in interest and tighter monetary policy TAXES will need to be raised in order to keep federal funds at a static rate…Loss of capital gains taxes coupled with a substantial slowdown in corporate profits will lead to a shortfall if taxes are not increased further causing inflationary forces…

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