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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (2974)	1/18/2001 11:09:43 AM
From: Yorikke	Respond to of 3536

Robert, I think you will be proved right. Rates are going to have come down more quickly than most people realize. But I don't think that will prove to be enough. The reluctance of the Japanese to reduce their rates exacerbated their decline. It is likely they lost a chance of keeping the economy out of recession by continuing to keep rates high and accumulate government surpluses. The Japanese boom was financed primarily by business debt. The government and households were both in a savings mode, and trade was in their favor. As the two articles point out, the rise in debt funded the 'bubble' and when that debt reached its limit the 'bubble' burst. Our situation is not exactly like Japans was. But I believe that we face a very serious one none the less. Business and Consumer debt is at record levels, The balance of payments is 'supported' only by inward investment flows, and the Government is running a surplus. If the rate of increase in debt in the private sector begins to decline while government surpluses continue, investment funds will dry up. It seems to me that we are headed in a similar direction as the Japanese economy if steps are not taken to quickly reduce the interest rate, increase government expenditures, and somehow deal with the coming consumer debt crisis. The opinion at the beginning of the week was that things are not as bad as they were portrayed. But the nasty news continues, with only the occasional positive report. I think the sentiment that 'things are getting better already' is a hysterical delusion. Most major downward moves experience that kind of public response. My feeling is that the Fed has manipulated the economy to protect the interests of the financial community on numerous occasions. That kind of intervention just amplifies cycles, and does little to create stability. I believe they are now going to have to act aggressively to counter the amplified negative cycle. regards