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To: Zeev Hed who wrote (69520)	2/19/2001 12:40:27 AM
From: Sweet Ol	Respond to of 99985

It is obvious that I am out of touch with consumer debt. I thank God for that! So, it sounds like it may trickle down faster than I thought. Best to all, John

To: Zeev Hed who wrote (69520)	2/19/2001 1:08:04 AM
From: Joan Osland Graffius	Read Replies (2) \| Respond to of 99985

Hi Zeev, >>Lower interest rates does trickle quite rapidly you consumers and corporations bottom line. I think we have a different situation today than during most recent economic downturns. The costs of utilities, i.e. electricity, natural gas, telephone, cell phone, cable television; have all increased to the point that any refinancing will be eaten to pay these bills. We are also incurring increased costs for food and most things other things we purchase. I know a slew of people that bought new homes during the past 10 years and they are refinancing just to free up capital to pay these bills. This last crop of new homes around here during the 90's were build with 3000 to 5000 sq feet. Heating these homes when the cost of Natural Gas has doubled in price per unit and we are using 3 time the natural gas to heat our homes is a very large shock to any budget. In Minneapolis people are really tighting their belts because of the GE/Honeywell get together. There is a huge Honeywell population here and no one feels secure with their jobs. Honeywell has a large number of vendors in the area which just makes matters worse. The state of Minnesota is already feeling the fall out of decreased tax receipts. You are aware that the average household holds $8000 in credit card bills. Now I don't have any so someone else has more than $8000. <g> The only thing that I have seen cheaper are consumer electronics and fire after christmas sales at our local clothing stores. We recently purchased a 36" HDTV ready flat screen TV and negotiated a heck of a discount. Of course they threw up when we wrote a check and they were not going to be able to get over 20% interest on a loan. <g> I sure could be wrong, but this is my current take on the state of affairs today.

To: Zeev Hed who wrote (69520)	2/19/2001 9:46:51 AM
From: KyrosL	Read Replies (2) \| Respond to of 99985

I agree that LT interest rates are much more relevant for the consumer than ST. But will LT interest rates follow ST rates down? The Fed only controls ST interest rates. LT interest rates have gone UP since the Fed lowered in January. And, if the surplus disappears, foreigners sell some of the 40% of US Treasuries or 20% of corporates they own, and inflation perks up some more, LT rates will go up a lot more, regardless of what the Fed does with ST rates. The Fed's control of interest rates is much more tenuous than is generally believed. We are increasingly dependent on the kindness of friends and strangers.

To: Zeev Hed who wrote (69520)	2/19/2001 11:50:37 AM
From: UnBelievable	Respond to of 99985

We Will Be Able To See Just How Quickly By Following PPI and CPI

To: Zeev Hed who wrote (69520)	2/19/2001 5:28:56 PM
From: reaper	Read Replies (1) \| Respond to of 99985

Zeev You (and others) seriously over-estimate the effect of lower interest rates on aggregate consumption This Fed study federalreserve.gov notes that in the 1998-1999 re-financing boom, aggregate annual mortgage payments declined by $5.6 billion, on net, or about $680 for the average re-financing homeowner. that's not a lot of money (aggregate personal consumption expenditures are +/- $6 trillion in the US). it goes on to further point out that these savings are to some extent a zero-sum game, since every dollar a consumer saves on lower mortgage payments is a dollar less a saver (who owns say a money market fund) gets in interest payments. so yeah, i'm paying less on my new mortgage right now, but the fixed income part of my retirement portfolio is earning a lower rate of interest -- robbing from the future for current consumption, to some extent. the REAL effect comes not from lower payments but from stealing from home equity. this same Fed paper estimates that consumers liquidated $55 billion of equity in their homes in this 1998-1999 re-financing period (this does not include home-equity loans, only re-finances where large loans were taken out; if you include home equity loans the effect would obviously be larger). so the overall effect of the current re-financing boom is basically people stealing from the equity in their homes and from the interest income in their retirement/pension/insurance accounts to finance current consumption. robbing from peter to pay paul. somebody will need to explain to me why this is good for the economy. cheers