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To: eddieww who wrote (46223)	12/11/2000 3:20:07 PM
From: marginmike	Respond to of 436258

In 74, and 29 it happened. Just cause your told it cant happen doesnt make it the case. In Japan as well rates were slashed, why did their Bull market not re-apear? It was the Japan that could say no, do you remember? We have had a great run for 10 years its OVER, and all the fed easing will do is soften the fall in the economy and the markets. They will ultimatly fall, as the always do.

To: eddieww who wrote (46223)	12/11/2000 3:29:18 PM
From: Oblomov	Read Replies (1) \| Respond to of 436258

But how do you get deflation in the face of Fed easing and heavy printing? Printing and easing only causes inflation if the demand for dollars does not rise at as high a rate as the increase in money supply. If the demand for cash is high (as would be the case in a debt crisis), then deflation results as uneconomic, illiquid tangible goods are liquidated to raise cash. You are correct that inflation favors the debtor. We have just passed through a period of high inflation, though it occurred in stocks and real estate instead of consumer goods. And debt levels have risen most in those segments of the population who have greatest participation in the equity and real estate markets. In an environment of high consumer goods and wage inflation, the lender is indeed the bag holder, and so they simply stop lending.

To: eddieww who wrote (46223)	12/11/2000 3:39:01 PM
From: chic_hearne	Read Replies (3) \| Respond to of 436258

For instance, my only debt is my mortgage at 7 1/8% fixed 30yrs. If my income can keep up..... That is one damn big "IF". For my industry (computers), I fully expect salaries to go down, possibly a significant amount. There's massive un-equalities in the job market, I saw it first hand graduating college as I could easily get $50K and most others were lucky to crack $30K (teachers, business, etc). What few realize is the majority of projects going on know don't need to happen. It may be a pain in the ass to run a business on a mainframe using dumb terminals, but it works. In a slowing economy with tougher profits, I think I lot of these kind of projects will get delayed. Combine that with the get dot com rich attitude of many in college and flood of new graduates on the way, and well yes, it's just another bubble to be burst. At best, I don't see wages rising as fast as people are used to. The same crunch will likely be felt in many industries. We've been dealing with a job market that is so tight it is virtually full employment (I believe there's a natural percentage of people that just aren't capable of working, about 3-4%). I don't buy into the productivity gains keeping unit labor costs in check. I expect this little white lie to be unwound. When unemployment moves up, there should be a move to more realistic job markets where people are fighting for jobs. Not like today where you just get fed up and quit because you know you can find something else. The type of job market where if you don't get a raise, you shut up and take it, because you know it's rough out there. Watch labor costs as unemployment moves up in a slowing economy.

To: eddieww who wrote (46223)	12/11/2000 4:36:23 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 436258

a Fed easing is useless if liquidity trap conditions become prevalent. it doesn't help any to print a lot of money when there are no takers for it. and right now, there are none...to wit, credit spreads are now HIGHER than they were during the height of the '98 crisis...likewise, the spread between inflation-protected govt. bonds and the normal kind has been shrinking fast, to a new low. that indicates inflation expectations are waning fast. and let's not forget that the Fed represents lenders rather than borrowers...it is obsessed with inflation for that very reason imo. an attempt to inflate out of this morass, if it were seen to be potentially successful, would lead to a deluge of foreign selling of US assets, destroying the dollar in the process. regarding Japan, i don't know what difference it should make that they were an external creditor at the time of their bubble denouement, except that there was little foreign selling pressure on the Yen. note that Japan's savings rate, which was already high when their bubble peaked, simply went even higher. but the Japanese at least have a choice, or rather their household sector has. the same can not be said of the US household sector with its negative savings rate plus the highest ratio of debt to disposable income (108% now) in history. likewise, the corporate sector's indebtedness is at record highs...it all points to the likelihood of an economic downturn leading to the deflationary cutback in consumption and capital expenditures that has already started. one has to keep in mind, the Fed owns no magic wand...note the chart i posted earlier of the Fed rate cuts in the early 30's...in spite of those, the money supply contracted sharply, as no borrowers were able or willing to take advantage of the lower rates. a Fed easing has only an inflationary effect if it results in the creation of additional debt.