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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Perspective who wrote (251018)7/19/2003 10:47:30 AM
From: mishedlo  Read Replies (1) of 436258
 
From Plunger on the FOOL
I don't see future inflation as a done deal just yet.

Incomes are still declining. The best measure of aggregate incomes is aggregate income tax receipts. Going down.

This is the real inflation item the Fed is concerned with because this represents the ability to service debt and so keep the financial system afloat.

Given the domestic and foreign unused capacity we are still in a deflationary period. The only way the Fed can combat it is to try and get asset prices up, which they've done, but they need to keep people spending from those assets.

OK Greenspan has taken a flier that he can shout at business leaders and get them to invest. But with all that unused capacity, and a stalling consumer going forwards, he must think these guys are ex-Kamikaze pilots ...

So the asset feelgood will last a quarter or so IMO then they need to do another pump. The Fed's ONLY TRICK is to lower interest rates, and to encourage longer term rates down especially. That's what they will have to do to stand any chance of getting inflation to take off.

I repeat the first step has to be to get LOWER bond yields.

Unless you believe in the amazing 2H2003 recovery already.

Plunger.
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