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

To: BGR who wrote (78416)	3/23/2000 10:06:00 AM
From: Mike M2	Read Replies (1) \| Respond to of 132070

BGR, you ask for proof in 1999 there was $5 of credit growth for every $1 increase in GDP. We have covered this before in 1929 the credit growth peaked at $2.20 for every dollar of GDP growth. These numbers demonstrate that much of the credit growth is being channeled into financial speculation rather than productive purposes. If credit is used for investment in productive enterprise it should be captured in the GDP statistics Right? If not please explain where you think this credit is going? mike

To: BGR who wrote (78416)	3/23/2000 10:08:00 AM
From: pater tenebrarum	Read Replies (1) \| Respond to of 132070

that's simple...compare money supply growth to economic growth over the same period (the last decade for instance). if there's a big gap between the two, money supply is growing too fast. another way of looking at it is to look at private sector debt expansion. currently every dollar in economic growth requires $ 5,30 in new private sector debt. if the money supply grows beyond the needs of the economy, one or both of two things happen: either asset prices rise inordinately, or goods prises do. those are the inflationary symptoms of the money supply growth. this is quite obvious when overlaying a chart of the S&P 500 with a chart of M3 or MZM. at the same time the money supply growth got in overdrive, the S&P did too. this is due to the fact that no productive use for the additional money could be found. so it went partly into consumption (of which the ballooning current account deficit is one symptom) and partly into financial and real estate assets. this is why the US stock market is now the most overvalued stock market in the history of speculating man. got it?