Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: UnBelievable who wrote (53004)	1/3/2001 9:40:32 AM
From: LLCF	Read Replies (1) \| Respond to of 436258

<There is no solution to our problem now. In good years part of what is produced needs to be saved for the lean years. When in good years, not only is nothing saved, but the rate of borrowing from the future actually increases, what can be done when the lean years arrive. It has been thus since the beginning of time.> When you say save for the lean years.... doesn't internet stock count? -gg- DAK

To: UnBelievable who wrote (53004)	1/3/2001 2:32:38 PM
From: sea_biscuit	Read Replies (1) \| Respond to of 436258

Good points. I think that the Fed is not so much concerned about inflation as about the need to keep growth going. So we can expect inflation to increase in the coming years. And we can also expect the Fed to understate the inflation numbers, as they have been doing for quite a while now. Of course, the risk of foreign investors pulling out their investments is always there. So the Fed has to really walk the tightrope on this one. If the foreign currencies also inflate about the same as the dollar, then maybe things will work out. Whew! Anywho, we got our 1/2 point interest rate cut today -- sooner than most of us expected, and more than a lot of us expected as well. Greenspan is committed to saving the economy, and not the stock market. But these days, a declining stock market automatically implies an economy headed for recession. Whether this will be able to bail the stock market remains to be seen.

To: UnBelievable who wrote (53004)	1/3/2001 6:11:23 PM
From: flyboy	Read Replies (3) \| Respond to of 436258

It is true that printing dollars devalues them but the problem is not nearly that simplistic... Perception is what the real value of money or ANY currency. Supply and demand is issued by what our perception of need. The lowering of interest rates will not devalue our currency against others as it summarily expected. The tightening of monetary policy the last couple of years has diminished constructive influences that our economy had been accustomed to. The dry up of liquidity would have caused bank failures almost assuredly just as happened in Japan. Deflation is ALWAYS much more dangerous that inflation for any economy. When someone uses a dollar to buy good or services they are using American economy notes for the purchase in a way. The strength in currency or stock is not based on just numbers but much more significantly emotion and trust. Greenspan above all else is a banker. Because of the ridiculous pricing of equities in the last year forward-looking projections were out of whack. The projections though technically sound were not fiscally responsible. Our banks (not unlike Japan's in the late 80's) overextended their lending based on these growth models. Since the capital markets were so liquid companies were able to issue bonds and generate debt to fuel their growth expectations. Because so many companies were doing the same thing at the same time prices were overextended. T is a great example of this as is AMZN and JDSU. The loss in equity value has cause a severe dry up of liquidity that may force even profitable companies into bankruptcy. The liquidity crisis is similar to that which Japan has dealt with the last decade BUT the reasons are far different. Lawrence Summers is a dangerous fed official in my opinion because his bookish knowledge of financials is limited to rear view numbers and not sentiment and emotion (the 2 most important parts of capital markets). Because Summers and his camp are entrenched in the non easing of monetary policy due to inflation fears I fully expected Mr. Greenspan himself to cut rates by as much as 50 basis points BEFORE the next meeting. Given his position as chief he has the authority to act autonomously between meetings. I think that the rate cut was somewhat overdue but certainly necessary. In Japan the depression was promulgated by the failure of the state run technology fund. Corruption in the Japanese government depleted the reserves held for technological and productivity advancement. The fund was designed to give corporations money to gain a technological advancement worldwide to promote expansion. In the 1990's our country used the stock market for the same purpose. Our own Federal reserve has targeted this revenue source and thus possibly destroyed the economy in the process. I think they see the error in their ways before the end game.