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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Merritt who wrote (64174)	7/8/1999 10:03:00 AM
From: Mike M2	Respond to of 132070

Merritt, the banks behaviour is influenced by the too big to fail policy so they feel that they won't suffer the consequences of their recklessness. In the 30's critics of deposit insurance warned that insurance would promote unsound banking. There is a limit to the madness -where I do not know but Ludwig von Mises said " there is no means of avoiding the final collapse of a boom expansion brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion , or later as a final and total catastrophe of the currency system involved. " One other important point is that expanding a credit bubble requires an ever increasing expansion of credit to maintain the stimulative effect obviously at some point the debt becomes unserviceable and we suffer deflation ( contraction of credit) At some point the strong dollar will weaken and stop the insanity . Mike

To: Merritt who wrote (64174)	7/8/1999 10:24:00 AM
From: Knighty Tin	Respond to of 132070

Merritt, I have to note that bond interest rates have gone up nearly as much as they went down, which is what caused the previous debacle in the financial markets. It doesn't really matter which way the bond goes. If it moves strongly, somebody is getting killed in these derivative trades. Since I have long suspected that AG gave the big money center banks strong hints about his "I see nussink" policy as far as the bubble goes, they are on the right side of the trades. But if the counter parties are hurting puppies, it could be just as bad. I have never disagree with bailing out the banks. But, just like bailing out one of your buddies, you require certain guarantees of future behavior that will save you from being called on again in the near future. The Fed didn't do that. The Fed is throwing money at the market. I suspect they see some worse things going on than we do.