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Strategies & Market Trends : New US Economy Policy -- Ignore unavailable to you. Want to Upgrade?

To: Arthur Tang who wrote (234)	7/7/2000 10:09:24 PM
From: Arthur Tang	Read Replies (1) \| Respond to of 435

What this new economy did for our children? And why Greenspan's interest rate increase is but an interim step? Each of our president overspent during their administration until 1995; the total accumulation of national debt was $6 trillion. Of which the FEDS sold $4.5 trillion treasury bonds. The rest of the debt was covered by printing new money. There just wasn't any rich man or country that can afford to buy our debt anymore. Recent FEDs' action was to repo back the rest of the national debt. Our president, Bill Clinton recently announced the reduction of national debt down to $1.87 trillion. Greenspan and company had repo-ed $2.63 trillion of treasury bonds off the market. The cash amount paid for the bonds, mostly to the banks, went into Nasdaq stocks. Early this year the loose cash policy created the Nasdaq boom, shooting up to 5000 on the index. The reason for the shift in investment is because of the new economy and the bonds are no longer an instrument of choice in the new economy. Wall street apparently did not understand where the cash is coming from. It proceeded to pull back the stocks on Nasdaq, almost destroyed all the money released from bond investment, by pulling back to 3000 level on the Nasdaq. Even today, they are afraid of Greenspan and company tightening the interest rates even more later. The higher interest rate will only hurt the large banks. The smaller community banks are full of deposits and free of loans from FEDs or Homeloan board. And if Nasdaq pulled back on the investments the banks traded the bonds for; a double wammy will fall on the member banks of the FEDs. Greenspan will have to stop the repo, and the cash cow will cease to exist on Nasdaq. Greenspan will also have to cease buying back the national debt. Greenspan will also have to lower the interest rate of the overnight discount loan to 5%, the norm for US economy and normal support of the US currency strength relative to all the other currencies. So much for the true understand of the new economy and national debt. With the national debt almost gone, the national budget will have more chance of surplus each year. We then should not consider tax cut. But we should give our children free college education. Education, if you want to know, is financed by local real estate tax and not federal taxes. But federal taxes will and could supplement the college operating expenses. It is the proper way to design a new economy, and we are doing it. We are not worried about Greenspan, if we can see the end of the tunnel.