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To: KyrosL who wrote (62466)	1/28/2001 9:22:56 PM
From: Mark Adams	Respond to of 436258

The US saved the world in 1998 because it was able to absorb huge export increases from Asia I'm thinking nothing was saved. Just the ultimate defeat prolonged, maybe mitigated a bit. I say this, because despite the US acting as the consumer of last resort, the price of Oil still dipped to $10/barrel, doing immense damage to the Oil patch locally and globally. What we see today in California is partially a reprecussion. IMO. BWDIK? Who is going to be the importer of last resort if the US goes into recession? Well, the Far East Economic Review has an article that discusses this in depth. I read it after I proposed the sunny scenario. They seem to think that Asia will muddle through ok, with a little help from Europe. It's worth looking at, but I read it with a grain of salt, as Economics isn't called the dismal science for no reason. feer.com I think that Asia is dead if the US slowdown lasts more than a couple of quarters. They never corrected the structural problems that brought about 1998. They simply exported their way out of the problems Well, the situation is pretty dynamic. I agree SE Asia faces serious risks. But I'm trying to develop a scenario which suggests how things could turn out better than expected. That scenario requires that some things go right. What happens to the US economy if the savings rate jumps back to the post WWII average of 8% from the current 0%? The negative savings rate has been subject to dispute, due to errors, in guess what? The way the number is calculated. If you take capital gains, then pay taxes on the gains, the taxes paid dilute your spendable income but the gains do not increase your income. I imagine the added tax burden from 98 roth conversions could play into this too. Overall, I try not to place to much weight into the numbers published, as I can't grasp what they intend to indicate, and I suspect they are way out of date giving the new global financial engineering that we've seen created during the past decade. The only way to avoid depression will be for the government to swing back to hefty deficits. I fully expect this, even without a depression. The real surplus isn't as large as reported, given our government works on cash accounting rather than accrural, and the tax act of 97 combined with stock and real estate gains have temporarily shifted tax revenues upwards, and drawn against future tax revenues. Both these positives for the surplus are declining as time passes, and may begin to impart a negative on federal revenue soon. So, without a recession, we may see the surplus disappear. With a recession, we may have substantial deficit spending. I doubt that LT interest rates come down to 4% then. And what if the dollar weakens and foreigners stop financing the US trade deficit to the tune of $400 billion a year, or worse, start liquidating their hefty US investments. I don't think LT interest rates will fall under this scenario either. Well, that is a speculation, that we could see nominal rates of 4%. True, we are a debtor nation. That only means they have the right to request higher rates for us to borrow. It doesn't mean that anyone will borrow at higher rates. In the US at least. Getting to 4% nominal implies that forgein rates also delcine some, but not much. Regarding the 400 billion, well that's one of those old numbers that doesn't really take into account the new paradigms. What, we can refute the GDP & CPI, but we want to declare the trade imbalance sancrosanct? I'll suggest one example of how the trade deficit could fail to account for the new paradigm, knowing that I'm not an expert and have put no study to the matter. Forgein affiliate income/earnings. The energy picture is very worrisome -- it may become the basis of a seventies style stagflation. Although oil is a smaller portion of the GDP as it was in the seventies, we now also have to worry about natural gas. NG prices have risen even more than oil, unlike what happened during the oil shocks of the seventies and early 90s. NG prices affect lots of stuff from electricity and heating bills to all kinds of chemicals. It seems almost every utility is building NG fired power plants at breakneck speed, and many peaking power plants will be burning NG this summer. This summer is going to get even uglier for the US consumer, just at the time the consensus says the slowdown will be over. I am not holding my breath. This is true. I don't see lower energy prices for the Western US this year. Which is the basis for my bearish attitude with stocks in general. What I'm thinking though, is that looking only to the Western US ignores the global picture. If things continue to deteriote in the US, what do you think that will do to global demand for oil? You think SE Asia uses more oil than the US? If oil prices do decline, it won't help the western us much, short term. But it will help the balance of the world, I suspect. I appreciate your effort to express your views. They are not far from my own.