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To: fedhead who wrote (49414)	12/19/2000 10:39:09 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 436258

i'm certainly open to the possibility. i agree that your argument regarding the difference between the nature of excess capacity in Japan and the US has some merit. that may allow for a more speedy resolution of the problem than in Japan, which is in addition hampered by cultural issues in its attempt to get out of the post bubble liquidity trap. regarding real estate, there are regional real estate bubbles in the US that have come quite far. not to the extremes that were seen in Japan's RE bubble, but frightening nonetheless (California and NYC come immediately to mind, and i'm sure there are other areas). the problem is that real estate is closely tied to the FNM/FRE credit sub-bubble. the same goes for much of the telco infrastructure overcapacity that has been built, it is tied to its own credit sub-bubble. Richebacher calculated that last year alone, every dollar of GDP growth was accompanied by $4,45 in new debt. and that's the quandary, and the main reason i am worried this might be a secular bear. obviously it is not possible to continue to grow debt at such a skewed ratio to GDP growth, as at some point the cash flows that are needed to support it simply won't be materializing. and too big a proportion of this debt has gone into consumption and financial / real estate asset speculation. even companies themselves have expanded their balance sheets to buy back their own inflated stock, in the process misallocating capital. it is hard to gauge the true extent of malinvestment in the US economy, but i suspect it is extremely large. just e.g., check how many new sports stadiums have been built in recent years...i don't remember the exact figures, but i remember i was stunned, by both the raw data and the extent to which debt was used to finance these outbreaks of grandeur and decadence. the problem is, that in order to reliquefy the system and restart the 'virtuous cycle' , debt creation has to progress at ever steepening rates...while i won't rule out that that might be possible, we'd be back at square one in no time at all, with even bigger bubbles to worry about. the only way to cleanse the system and get it to the point from which it can regenerate is by allowing it to go into recession, re-build savings, get rid of malinvestments and bad debt as fast as possible, all with preferably minimum interference from the authorities (fat chance). unfortunately, with the bubble already a fait accompli, this 'cleansing' will likely involve a long period of TL&EV. re. bank stocks, i have asked myself a similar question when the broker index broke out to new highs. it seemed to indicate clear sailing for the stock market ahead. it has turned into a trap. but like i said, i'm trying to keep an open mind. the confidence factor plays a huge role here, and obviously confidence in Greenspan is very high...but he is but one mortal man and an old codger at that. i also happen to think that he was extraordinarily lucky to have presided over a huge primary bull market trend. his actions may have less of an effect in a primary bear.