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To: B.REVERE who wrote (7769)	4/29/2001 8:48:55 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 17683

BTW, the fed can't control energy and consumers will rather heat/cool their house and drive their gas-guzzling SUV's than take their hard earned cash to keep this casino afloat. B.Revere, While I would agree that people will be forced to spend more of their discretionary income this year (and probably next) paying through the nose for the energy policy failures of the Clinton administration, I would have to take issue about where people will put their "hard earned cash". That cash is primarily driven by 401K and IRA accounts which see relatively consistent inflows of cash every year. Since many folks see their contributions matched by employers (the Federal Govt matches 100% of TSP contributions), there is a STRONG INCENTIVE for individuals to make maximum contributions EVERY YEAR. Just contribuing the maximum to one's retirement account means they are guaranteed 100% gains for the year (for Fed Govt workers), and andwhere between 10-50% for other plans. But that does not mean that there is a comparable incentive to deploy that cash into equities. Thus, the obvious build-up of cash we are seeing on the sidelines in money market accounts. This is the flaw that economic data seemingly fails to take into account when determining the savings rate for Americans. PEOPLE ARE SAVING.. they just aren't saving in the same way that traditional economic theory takes into account. And that cash is sitting there being parked in USD denominated money market accounts and a limited quantity of US Treasuries, which has driven up the value of the USD as compared to other currencies. And this build-up of cash has forced the Fed to increase liquidity on a tremendous scale in order to accomodate those funds being placed in money market accounts, or debt offerings. As people sell equities and park it in cash money market accounts, MZM must increase. So what would be required to utterly crash the dollar would be massive unemployment, which would immediately dry up the source of available capital to be supplied to retirement plans, as well as FICA tax contributions which make up the majority of the Tax surplus. This gives the Fed POWERFUL ammunition with regard to restoring economic confidence as they lower rates. But when rates are lowered to the point where consumers are willing to purchase descretionary/luxury items, then the Fed faces the problem of sopping up that extra liquidity they added. And as the availability of US treasuries decrease as the public debt is paid down, the Fed will have less ability to react in an incremental and gradual manner. Right now we're facing potential stagflation in certain industries like utilities (unless costs can be passed on to consumers), but natural gas, fixed cost power providers (nuclear), oil refiners, and energy explorers will likely see tremendous growth as they rush to build the energy infrastructure that has been neglected while the information sector has soaked up all available excess energy capacity. In sum, certain sectors almost always find themselves in various states of deflation, inflation, stagflation, or outright recession. Energy is probably a rising star over the next 12-24 months, even if the technology sector remains in recession. And should technology and the rest of the economy restore limited growth this year due to productivity gains, the energy sector will exceed them in realized gains due to the increased energy demands. Hawkmoon