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Politics : Ask Michael Burke

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To: Mike M2 who wrote (35981)	11/12/1998 6:53:00 PM
From: Tommaso	Read Replies (2) of 132070

Turns out that Tice was more nearly correct than I thought about money supply figures: bog.frb.fed.us It's now clear that one reason bond prices rose so fast back in August was that the Fed was buying bonds, thereby creating money and lowering the long bond's interest rate. This was in addition to the surprise rate cut that set off the bear market rally. I am trying to comment on this without interjecting things like "the fools!" into what I say, but it does look as if they panicked, fearing some sort of collapse was under way, and ended by making the whole system even more unstable. If we go the way of 1969-1974, we should have a decline in equity prices followed by inflation in commodities, which prompts the Fed to raise interest rates, which pushes equities into deeper collapse. It may not be as extreme, since there is no Vietnam war going on and since the social fabric is not nearly as frayed (William Bennett's diatribes nothwistanding). In any case, look at those figures. There's your helium cylinder.

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