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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: Dalin who wrote (30452)	5/2/2000 10:54:00 AM
From: Cynic 2005	Read Replies (1) \| Respond to of 42523

<<The EMS (Electronic Manufacturing Service)industry has seen robust productivity increases during the last couple of years>> Rabits have tremendous productivity in terms of multiplying themselves. The question is: a) do wee need that many rabbits? b) if we do need them, what will happen to the market price of rabbits? c) if we don't need them or if the excess supply drives the prices down, at least some of the excess rabbit production has to go to maintain some kind of price stability. Which in turn means that those who are employed in the rabbit reproduction industry have to lose their jobs. d) more such industries mean more such jobs have to go. e) excess capacity leads to lack of pricing power which leads to the secular down trend in inflation. However, when bubbles as big as the one we have develops, a cyclical up turn in inflation is inevitable. The Feds, under their mandate have to act. With so many imbalances in this heavily leveraged economy, increased cost of money will lead to an inevitable adjustment towards less risk. That delta change in risk aversion will lead to a catastrophic fall in bubble assets, like stocks. That is the essence of thinking by many who hang around here. The Houses have no control on a problem of this proportion. If anything, their excessive greed and reckless lending will magnify the moves on both sides. Of course, we all know why Alan Greenspan is called Asymetric Al. He has an asymetric policy! Steeply rising financial asset prices due to excessive speculative orgy is a OK and the opposite is not. That is why he is Mr. Bailout! Ultimate moral hazard.