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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Ahda who wrote (601)	12/14/2000 3:15:53 PM
From: ahhaha	Read Replies (2) \| Respond to of 24758

Is there any method of determining how the high debt ratio of the consumer combined with lack of savings could affect our economy? The three variables are not well-correlated. The savings rate is a matter of preferences. It has no economic consequence. Do you ever have too little currency to pay your bills? If one assumes lower interest rates promotes growth Not a good assumption. Interest rates can fall to zero or lower without any attendant increase in demand or output. When interest rates are falling it means that demand for loanable funds is falling and that means people are reducing their future expectations for generating output. then the question could also be, did we not create artificial growth due to future evaluations that made no sense? Interest rates were rising and the stock market, the indicator of rising expectations, was rising too. Artificial growth is false expectation. The stock market is now correcting its mistaken discounting of a possible future, with another mistaken discounting of the opposite possible future. The expectations are allowed to go everywhere that they do by a FED which looks backward and decides the future based on the past. FED setting rates is considered superior to allowing the free market determine the proper cost of money with the outcome of wild swings in the stock market netting 3 crashes in 3 years. So if you would like to know who is the culprit for allowing the public to engage in artificialities, you need go no farther than the FED. The net would have required doubling of consumer buying ability to create that kind of prosperity in our economy, The FED pumped $200 billion at the end of last year to tide us over in case y2k made a difference. It didn't go into final demand. It did create an artificiality that supported a wild speculative binge in the stock market. Then the FED had to remove the 'bills. End of artificiality. End of bull s market which actually internally started down 4/98. it fractured all numerical basis in my mind that adhered to the principle of supply and demand. The FED pumped up the stock market and then they let it fall. Seems that's very much a fair balance of supply and demand. Are there mathematical equations that could prove that there is a base of growth that is sustainable and not interest tinkered with to create balloons? No. I think what i am trying to figure out is how lowering the rates will do much other than continue or stretch out the truth our economy has already inflated to the point where contraction is going to prove the word gradual not at all gradual. You're quite right. This is the dilemma facing the FED. If they pump, they threaten a return to a regime of expectation for rising future prices. If they add less than real output demands, they induce recession. What should they do? They can't solve it. That's why we have free markets. Except in money. The FED has now completed the cycle. They have returned us to where we were decades ago. The added feature is the new cyclical amplitude and frequency increases. We have the unlimited fun of a great new ride called "Crash City". Just don't invest in it.