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To: Oblomov who wrote (59098)	1/18/2001 9:21:55 AM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

i disagree completely. it's NOT meaningless, because debt needs to be serviced out of disposable income. who services debt with asset sales, unless he's already in financial distress? besides, 2000 was the first year since WW2 in which HH net worth actually FELL, an indication that HH involvement in the stock market is quite large. furthermore, the assets that make up net worth may well decline further in price, while the debt load remains right were it is (well, no, it's actually GROWING). the ability to repay can NOT be measured by looking at net worth, because if only a small percentage of households were to try to sell these assets in order to pay their debt, the value of these assets would plunge precipitously, thus lowering EVERYBODY's net worth. consider that the '87 BK was the result of only 3% of invested monies being withdrawn from stocks. 3 percent! but because they tried to get out all at the same time, the market crashed. real estate prices WILL be hit eventually. just like in Japan, i expect this to happen with about a one year delay from the stock market peak. one more thing: remember, IN SPITE of the RE bubble that's been raging in many regions, home equity ownership has actually declined in recent years. so debt was taken on at an even faster pace than the appreciation of the underlying assets. clearly a recipe for disaster, and if the Fed and the GSE's succeed in blowing up the RE bubble even more, it only means the disaster will be that much worse. i agree that monetary profligacy still has mainly an effect on asset prices, but that's on the cusp of changing imo. after all, a NAZ that has deflated by 50% will simply not attract as much money as it used to while it was still inflating. this time, the excess liquidity will go elsewhere, and eventually there won't be any excess liquidity anymore, as defaults mount and lenders pull in their horns. Al will be pushing on a string then.