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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (36186)	1/5/2001 3:25:05 PM
From: JDinBaltimore	Respond to of 50167

Ike, Your points are well taken. I don't claim to know what is going to take this current economy down, as there are many possible scenarios. Crystal Ball's lucid points, be duley commended, had me playing devil's advocate. If we just look on the domestic side first. Savings Rate, I beleive in July, were negative.. the first time ever since this statistic has been tracked. Banks, one has to look at where earnings are comming from, and a large chunk is from the re-fi market. I'm aware of some aquaintences that have refinanced their homes 3-4 times, in quest of lower rates. There are institutions here in Maryland that will lend 120% of market value. On top of home equity borrowing, there is credit card debt. There was an article in Wash Post last week stating that the average person filing Bankrupcy in last year had an average of 51,700 in credit card debt. Models of previous U.S. growth economies prove that 6-8% unemployment is "Healthy" and almost required. IMHO! current U.S. economy is a house of cards. You Know that I'm a bear, and accordingly was whipsawed a bit with the Greenspan stunt. First off I didn't even know that he could do that, secondly after Bush Jr. and greenspan met, the verbage that came out was pretty much George W. was going to get a tax cut, and Greenspan told him to slowdown. I beleive this now was definately a democratic stunt to delay recession, and place blame on bush admin. Now it has backfired, Ike, no offense intended, but this is classic textbook recession rhetoric. The fact that employment remains stubbornly low, is a problem, couple that with a tax cut, and lower interest rates, the mix for a hard landing is there. Your guess to the mix for the equation is as good as mine. But, if I may throw my darts first, I'd place my shorts on the consumer debt equation. As I beleive current economy is being floated by excessive presonal debt. This tax cut, if it materializes will prolong the inevitable, but if you're not employed, the cut is useless. As with rate hikes, and decreases, they take months to filter into the economy, before their full effect is realized, as with market downturns. The 52% drop in the NAZ has not impacted this economy yet. It takes about 4-6 monts in the US before forclosure proceedings can get your house from you, and this can be extended if you have a lot of plastic that you can borrow against. But eventually all avenues are ended. There was another poster that mentioned fund outflows yesterday... the mood of this country is ever so slowly changing. Cashing in fund shares for whatever reason, is a temporary mental insurance factor. But now the economy light has changed from green to yellow caution. Unemployment "WILL" migrate back to 6-8%, at 5.75% with no tax cut the current surplus is wiped out! The Federal Government will continue to exist, so were back to deficit spending again, and the only way to attract that capital, is with higher rates. So mu chips are on an inflationary recession.... Your Turn.. As Always Ike I seek to temper enthusiasm. John