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To: Alexander who wrote (74256)	11/8/1999 2:31:00 PM
From: PaperChase	Read Replies (1) \| Respond to of 86076

To answer your question, AG raised rates because oil prices rose sharply. AG knows of the delayed trickle-down inflation affect of rising oil prices and he knows it will lead to higher prices over time. This is what the 1970's taught us consumers and investors at the time. What has temporarily offset the trickle-down inflation affect of higher oil prices and pressures on wages has been the significant investment in the private sector which has created excess capacity. At a certain point the excess capacity will not be able to offset the inflation pressure. The key to asset speculation retrenching is bank credit contracting. This is what drives the consumer and thus drives 2/3rds of the GNP. Whether this comes from a change to monetary policy (inflation driven) or change in regulatory pressures (brought on by a trigger event like derivative exposure), remains to be guessed about. In summary, the factors to watch to see when the party ends are: bank credit, oil prices, and excess capacity in the private sector.