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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (895)	1/29/2001 2:20:59 PM
From: ahhaha	Read Replies (1) \| Respond to of 24758

If the Fed stays out of the picture, don't you think that declining stock markets will result in a weaker economy The stock market generates no value. It's just a representation of the value created by the people in what is known the economy. which in turn will result in lower profits A declining stock market doesn't generate lower profits except for brokerage houses. which will result in plummeting stock markets By this reasoning the stock market should be negative by now. and layoffs which will result in the economy weakening further which will result in... and it will all lead to massive deflation? The same kind of reasoning was applied by many several years ago but in reverse to justify or rationalize why stock prices would advance indefinitely higher. And deflation = Depression. The East Coast universities agree with this and that has always been the problem. They will create depressions in order to avoid them. I suppose most people agree with that. It is probably better to live with inflation than to die in a Depression. This is the psychological depression that begets behavior leading to economic depression. From 1949 until 1979 this kind of philosophy was underlying the economic reality and the result was structural inflation. In order to cure the problem the people had to invent a way to survive a designed deflation. From 1980 until 1995 the country suffered a depression. It wasn't intense like the '30s because it was distributed over time. It was the price we had to pay for the need to do whatever was necessary to avoid depression. We are now squandering or have squandered what we gained by that depression in order to avoid what you have concluded will bring about another depression. Please explain how an economy gets off this merry-go-round.