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

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To: mishedlo who wrote (213860)	1/11/2003 2:00:40 AM
From: Perspective	Read Replies (2) of 436258

I think people are missing the single most important reason why this year could be the worst yet for stocks: AG is almost out of ammo. Despite his (and Bernanke's) protestations to the contrary, monetary policy traction IS about to run out. Yes, there are ways to try to jam more money into the system, but none are nearly as direct as the lowering of interest rates. Get Fed Funds to 0% and it becomes much, much trickier to lower market-based rates. Sure, you can buy all the bonds you want, but unless it gets transmitted through to borrowers in terms of lower rates, it doesn't help save the marginal overleveraged debtor. Our variable rate debt is almost entirely tied to short-term interest rates that are nearly zero. We're all so conditioned to believe in the Fed that even we bears are buying the latest line. They are partially correct, but hoping we all buy their half truths. In reality, the credit bubble is in serious trouble. Without further declining nominal rates, credit creation will seize up quickly. That should happen this year, and then the free market response, suppressed for so long, will be unleashed. <ng> BC

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