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

To: Arthur Tang who wrote (238)	7/29/2000 7:59:43 AM
From: Arthur Tang	Read Replies (1) \| Respond to of 435

A footnote on banking and the new economy? Banks are now clearly in two tiers. Large commercial banks under the overnight discount loan system and the small community banks under home loan board system. While the small community banks are profitable doing land development business, they are unable to loan out their deposits. Let alone borrow money from FEDS overnight for profit making ventures. They have to go deeper into car loan business to utilize all their deposits on hand. This year the used cars are enjoying a resurgence in business. The large commercial banks are changing their investment strategy. They are shifting from treasury bills to equity. Releasing treasury bills and bonds, so that FEDS can dissolve national debts. They have loan requirements from large corporations, which they have to compete with foreign banks at 6.44% libor rates. FEDS' influence on the economy is limited here to raising overnight discount rate and to destroying only these large banks. Broad Wall street pull back will effect bank investments on equity. This double wammy will put FEDS in serious position(back against the wall) to save the large banks. FEDS will knuckle under. A warning to Greenspan, that after all, he did not understand the dynamics of the US new economy. Cost of money is not a way to control economy; obsolescence and replacement plus recycling is the only way to control the demand side economy. Shifts in the way people spend their disposable income is how we build the economy, by creating new jobs.