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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (96653)	4/19/2001 10:47:54 PM
From: SouthFloridaGuy	Read Replies (3) \| Respond to of 436258

OK LISTEN UP BEARS. THIS IS NOT, I REPEAT, NOT 1998. THIS IS JAN OF '01 WITH A NICELY TIMED RATE CUT TO F&CK THE IDIOT SHORTS (I WAS IN CASH, ROFLMAO); BUT JUST LIKE JANUARY IT ENDS AFTER OPTIONS EXPIRY. IT'S TIME TO GET MORALE UP. LET'S GO BACK TO THE FUNDAMENTALS AND FOCUS ON WHY THIS SH!T IS NOT OVER: Why the US economy must come down by Gerard Jackson TNA News with Commentary Thursday 19 April 2001 The American economy strikes many as being a mysterious beast capable of defying the laws of nature in general and economic gravity in particular. But there is nothing new or mysterious about the US economy. It’s an old story that has been continually repeating itself since the dawn of the industrial age and will, I fear, continue to do so. As I have been pointing out for years, the ‘boom-and-bust cycle’ is a monetary phenomenon. It is not and never has been a product of market forces, greed or mass mania’s, which are only the visible signs of strong undercurrents of monetary disturbances. We need only remind ourselves that money is neither neutral or passive. On numerous occasions I have tried to explain that money is an incredibly active agent that will create clusters of malinvestments by misdirecting production during the course of a boom. Credit expansion is the means by which this is accomplished. As credit expansion is part of the money supply it is the responsibility of the Federal Reserve to control it. Instead it has allowed a reckless if not criminal expansion of credit to take place. It’s this credit that fuelled the boom, triggered hi-tech stock mania, blew the current account out and encouraged reckless borrowing. But it’s a story I have told so many times I’m beginning to understand how Cassandra felt when King Priam ignored her warning of Greeks bearing gifts. But like treachery and deceit, the erroneous ideas that justify credit expansion will always be with us, forever inserting their insidious presence into every government’s economic policy. And that includes US governments of every persuasion. Let’s look at some figures. Now Dr Frank Shostok pointed out elsewhere that in January 1980 the money base stood at $132 billion. By the end of April 2000 it stood at $574.2 billion, a 335 per cent rise. No wonder the federal funds rate fell from 17.6 per cent in 1980 to 3 per cent in 1993. Interesting enough, it has been estimated that the money base has shrunk by about $45 billion dollars since Greenspan started to raise rates. But has credit been shrinking? No. (Most people still do not understand that cash and bank credit are not identical). Nevertheless, the fact that consumer spending rose by 8.3 per cent in the last quarter of 2000 is not evidence that credit is still expanding. The growth in M3 demonstrates how reckless monetary policy has been. From December 1990 to December 2000 this monetary measure grew by more than 70 per cent. (It’s more than 100 per cent in Australia). And as I highlighted yesterday, the last 6 months saw M3 jump by about $600 billion which comes out at an annualised rate of 12-13 per cent. To put it simply: the Fed has flooded America with credit. Credit has much in common with a house flooded by burst water pipes. Even though the water is turned off it will still take time to drain the remaining water out of the structure and dry the place out. In other words, there is a time element. Nevertheless, even if credit is still expanding a shrinking cash base will eventually end it and bring on a credit crunch. And as I have explained before, real forces eventually move to burst the boom, no matter what happens to M1 or any other monetary measure. The length and depth of the expansion combined with the country’s low level of savings and the clear emergence of real forces strongly suggests to me that Americans should look to the near future with considerable misgivings, and make some attempt to recall Aesop’s fable of the Ant and the Grasshopper.