Strictly: Drilling II Message Board

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Strategies & Market Trends : Strictly: Drilling II

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To: Art Bechhoefer who wrote (20209)	10/13/2002 1:27:32 PM
From: c.hinton	Read Replies (1) of 36161

Just my 2 cents: Ever consider how long after inflation took hold inthe 70's for Fed policy to change to allow interest rates to catch up and begin to bring that inflation to a halt ?Maybe 7 0r 8 years.Why so long? because we needed that time to allow inflation to take the bite out of "long term" oil price hikes and "long term" gov.debt financing . Now I expect that real inflation will be higher than interest rates until the current debt load is sufficiently diluted, which considering the prevalence of "short term" debt,might have to be 3-5 years which implies a very sharp increase in M1.Once debt is under controll we will have to fight inflation as we did 24 years ago,only more so. One big problem is that the "short term"(straight short term debt and variable rate mortgages) nature of debt today will leave debtors very vulnerably to interest rate hikes demanded by the foriegners who are needed to finance that debt,a situation that was not nearly so present in the seventies. I may be playing the flatulette,but thats how I see it.

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