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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (2377)	3/13/2001 11:01:44 PM
From: Box-By-The-Riviera™	Respond to of 74559

thanks for the dialogue now back to the poots

To: NOW who wrote (2377)	3/14/2001 1:14:37 PM
From: rolatzi	Respond to of 74559

Of course we will see inflation. Greenspan will certainly opt for inflation over deflation as the lesser of two evils. He will continue to print his way out of the recession. Secondly, if the economy tanks, the "surplus" will disappear and the federal govt will deficit spend its way out of the recession. A big difference between 1929 and the present is that the Federal Government represents a much bigger percentage of the GDP. In the 30's it wasn't until we tooled up for the war that the economy was drawn out of the depression. We can also look forward to increased defense spending, a new initiative to build a missile defense system, restock the military with modern weaponry. The best part of this defense spending is that it doesn't lead to any inventory problems; The materials get used up or become obsolete and new weapons get created and built. Also, the transfer payments, social security, unemployment, welfare payments will continue to be printed, sent out to the consumer and spent. In 1930, when the stock market dropped to these same relative levels, deflation appeared. The CPI declined by per cents per month. When the stock market finally hit bottom (in 1932, i think, don't have the data in front of me), the CPI finally showed its smallest decline (less than -5% per annum) since the market had begun its crash. With the deflationary sentiment, people put off purchases, knowing that items would be much cheaper very soon and consumption plummetted. We won't see deflation on that scale because the Fed will flood the economy with money. rolatzi