Thanks Joel, as on the subject of deflation you may enjoy this:
The 1990s were known as the decade of IPOs, mergers, bubbles, and CEO's grabbing monster dollars via stock options. The current decade may well be known as the decade of debt and credit.
The sheer amount of debt in the nation is now astonishing. According to Ned Davis Research, the 50-year mean level of total credit as a percentage of the economy (GDP) was 177%. Starting in the mid-1980s the percentage started up, and it has continued to climb. The percentage is now at 272%, almost off the top of the charts. To put it mildly, this nation is choking on debt.
Probably one of the reasons the Fed has been dropping rates so frantically is to help corporations and individuals handle and service the current mountains of debt.
It's also clear that the Fed, if it had to make the choice, would prefer inflation to deflation. The reason is that in deflation, debt becomes far more difficult to service. Over the years, Fed-inspired inflation has allowed debtors to literally inflate away their debts. Inflation is the friend of debtors and the enemy of creditors -- and, of course, bonds, notes, bills and mortgages are credit instruments.
Deflation is a scary story. In deflation, debt loom progressively larger, since during deflation cash become more valuable and harder to accumulate. And if deflation looms too large it can push individuals, families and corporations into bankruptcy.
I assume that Greenspan knows what is going on. Which is why he has boomed the money supply and dropped interest rates like a lead balloon
(Thanks for restarting the thread, so sick of three clowns that have ruined the old one. Look forward to contributing to an on subject conversation.)
West |
