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

To: ahhaha who wrote (2232)	5/10/2001 11:50:52 PM
From: ahhaha	Read Replies (1) \| Respond to of 24758

it is my understanding that Greenspan and Chambers said there is a lack of capital being invested,and not that there was a lack of capital,per se. Any who want to clarify this are welcome. Max I've already answered this in my previous posts. Chambers and AG did not say "there is a lack of capital" so "there is a lack of capital being invested". You may have taken my words to mean that. It is optional to invest or not. The banks are flush with "capital", but it isn't "capital", that is, it isn't contribution or risk capital. It's borrowing capital. It has strings attached. You can't be sure you can meet the interest payments so that kind of capital piles up during uncertainty. The current perception is one of uncertainty and so the quantity of capital available for risk investment is low. Reserves piled high in banks don't alleviate that condition. The perception must change. This is the primary concern now for the FED because things are not acting like they have traditionally. The claim that this has something to do with capacity is absurd. It has to do with cost of marginal capacity or return on utilized capacity. Cutting taxes in a capital enhancing way provides incentive to innovation so that return on upgraded utilized capacity becomes greater without increasing total capacity. The same quantity of widgets is produced, but they are better widgets. Capacity changes over time are essentially zero anyway. Effective capacity is always about 100%. Measured capacity may be at 80% but that has nothing to do with output potential or profitability. If it costs substantially more to add some small amount of capacity, why bother especially in a world of variable competition? What must be added is an upgrade to existing capacity. That doesn't get done when risk capital is tight regardless of the quantity or cost of borrowing capital. If the FED coupon passes fail to get things hopping, then the school of demand management which dominates FED thinking including that of AG will be refuted just like it has been in Japan. Since Japan is a supply oriented capitalist economy, it isn't surprising they've fallen into a kind of liquidity trap, but in the US which is a demand oriented socialist economy, it is canon that Say's law of available funds will stimulate final demand. The funds to accomplish such stimulus only stimulate foreign economies because they are the low cost producers at any quality, so FED must stimulate the entire world. That's why today's ECB action helps, because FED can't stimulate the entire world without creating a total disaster. Nonetheless, the FED will only go about as fast as they are now, so the stock market is vulnerable to another hit. It's only waiting for an adequate excuse.