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To: TobagoJack who wrote (886)	11/22/2000 9:43:20 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 74559

but via purchase of corporate bonds and then undergo some sterilization process Well the congressman I was having this discussion with the other day confirmed that the only place the surplus is permitted to be "invested" is in Government treasury bonds, or IOW, national debt. Thus the surplus, unless used to buyback existing publicly held T-bills, ACTUALLY INCREASES the total debt outstanding. And since the government only repurchased $30 Billion worth of debt last year and will only repurchase $40 Billion THIS YEAR, we have to ask what will happen to the remainder of that $230 billion surplus we have "accumulated". It has to be parked somewhere and the only place they can legally do so is in govt debt instruments. In fact, although we have an accumulated $320 Billion surplus over the past two years, the national debt is some $60 billion higher than it was in December, 1998. This is confirmable by going to the Office of the Public Debt website and looking at the actual level of public debt outstanding. And the problem is that, despite the fact that we're due for a $200 Billion/year surplus over the next 10 years (based on 3% annual growth), the government just CANNOT buy back a similar amount of currently held debt since it will create drastic distortions in the bond markets, making govt debt even more favorable over commercial paper (thus boosting interest rates on mortgage and corporate bonds). Btw, if any of you took a look at the WSJ today, you'll see that Europe is having EXTREME difficulties implementing some of the essential economic restructuring they require on social entilements and creation of 401K style retirement programs. They are WAY BEHIND THE US in this regard and it is politically difficult to get this changes passed. And given the fact that elections are due next year, the belief is that these needed reforms will have to wait another year or so. That is destined to put even more pressure on the Euro, possibly creating a crisis of confidence there, higher interest rates to combat inflation from higher energy costs. Regards, Ron