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: pater tenebrarum who wrote (62159)	1/26/2001 3:48:01 PM
From: Mark Adams	Read Replies (3) \| Respond to of 436258

Can growth in Europe, Asia and China help the US to avoid a more serious downturn? I understand that the higher the debt burden, Corporate and Personal, the more protracted the eventual re-adjustment. But perhaps this is an over simplification. Good debt vs Bad Debt; Is the debt used to fund investment or consumption? If investment, is it being invested optimally, or poorly due to corrupted market signals? Like not passing through the true cost of electricity for years. There is no way to really know on a macro level- rising debt could be a good sign. We suspect rising debt as we have ancedotal evidence of debt creating excess capacity. PC's, Cellphones, Bandwidth etc. Overall, we say we expect the piper to be paid, and excess capacity created by low cost capital to be revalued. Can the debt burden used to create this excess capacity be served by the reduced income levels? If not, then the debt must also be revalued, destroying part of the capital. (Irridium?) Yet we continue to buy stocks we think will prosper based on remedying the lack of investment in certain areas, such as energy and infrastructure. It seems we want to have our cake and eat it too. We want the readjustment required to allow for sane future growth, yet we also want to risk our capital in a market that would be quite unfriendly during such adjustment. How well did the copper producers do during 1929-1932? Do we say our long positions are a hedge, protection in the event policy makers can pull off a soft landing? That a falling tide won't sink all boats? Or are we succumbing to the illusion of the markets? My behavior again appears irrational. I apologize for sharing my self doubts, but it is only through communication that insight can be achieved. And this illustrious gathering of people are among the few who can truly understand the issues. Inflation or Deflation? Some slumps are accompanied by dramatic depreciations of currency. These are inflationary depressions. Other depressions have been deflationary. They raise the value of cash. Whether a depression will be deflationary or inflationary is sometimes difficult to predict. <duh> The question is whether the collapse of purchasing power is accompanied by a selective or wholesale wipeout of creditors. In either event, the purchasing power tumbles. Therefore the real demand for commodities always falls. Real wealth declines, undermining the collateral upon which the structure of debt rests.