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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (129428)	12/10/2000 2:58:57 PM
From: tejek	Read Replies (1) \| Respond to of 1570483

Jim, RE:"But I would still contend that that the change in the real estate capital gains law was at best a secondary reason for the Fed's concern over inflation" It's well known that tax cuts are inflationary. They free up money. Yes, when those tax cuts are across the board and are large enough..which they usually aren't....then they might be inflationery. However, the gains tax targets only a certain segment of the population...the home owners....which are still around 60% of total households, and then only when they sell and reinvest. Where the inflation would be seen is in the housing markets themselves, and like I said before, the only markets that have seen inflationary increases are those with significant labor growth and/or restrictions on housing production. And I would say that that covers maybe 10% of the metro areas nationwide. RE:"It was the pressure on wages in tight labor markets coupled with oil prices creeping up that prompted the fear of inflation with the Feds" Ask yourself where a bunch of the money came from to pump up wages and increase oil consumption. You underestimate the impact of this expansion on the millions of people who previously never held a job and in turn, you underestimate the impact their newly acquired salaries have had on the economy. For most of the 90's, wages did not grow at an inflationery pace due to productivity gains. Its only through productivity gains could corporations increase their profits...intense global competition prevented them from increasing product prices in most industries. Only as we got to an unemployment rate of 3.9% did problems start to occur. Don't underestimate the power of an all out tax cut as on Real Estate. Some people had 20-30k in a house that was worth 300k, 500k and up. The idea they could take that gain, TAX FREE, was a big reason to sell, build new, downsize...pocket some money...put it in the market, whatever...even buy a gas guzzler... Most people I know did not downsize but moved up, and any extra $$$, they threw into the stock market.......to help create our bubble of last March. Unfortunately, neither of us can prove absolutely our theories so maybe its best to let it rest. ;~)) ted