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To: pater tenebrarum who wrote (108012)	6/11/2001 10:33:01 AM
From: Mark Adams	Read Replies (2) \| Respond to of 436258

I'm just finding that consumer debt has expanded, and sharing what I found. Would prefer log charts, but haven't expended the effort to figure out how to coerce excel into doing that. Debt really expanded during 77-87; I would expect GSEs to have dramatically expanded their balance sheets during that period too. Or do we say that was before banks became a mere transit station for loans? rbcassociates.homestead.com Longer view; rbcassociates.homestead.com

To: pater tenebrarum who wrote (108012)	6/11/2001 10:34:50 AM
From: Ken98	Read Replies (2) \| Respond to of 436258

Heinz, have you seen anything about this? <<The Federal Housing Administration has shut down its multi-family lending program because of a squabble between the mortgage banking industry and the White House over loan loss reserves. The decision has cut off funding for billions of dollars in new projects. The FHA insures loans on moderate-income apartments and has been instrumental in the development of several downtown Dallas loft housing communities. But the Bush administration has refused to authorize more reserves, and the FHA stopped doing apartment deals April 19. About 1,947 Dallas-Fort Worth apartments valued at $126.7 million have been put in limbo because of the problem, according to the Mortgage Bankers Association of America. Nationally, 53,000 apartments are on hold.>>

To: pater tenebrarum who wrote (108012)	6/11/2001 10:42:17 AM
From: Thomas M.	Read Replies (2) \| Respond to of 436258

Albert Friedberg of the Friedberg Mercantile Group: <<< Yes. Japan is an interesting case. Contrary to popular wisdom, Japan should want more deflation. I know what I’m going say sounds pretty crazy. Most people want to get Japan out of deflation. But Japan’s problem is that it hasn’t allowed its deflation to run its course. No pain, no gain, again? They’ve contained the deflation. Now why is that so important? Well, remember I said inflation is negative because it eats into consumers’ real income. By the same token, deflation, when not accompanied by negative growth - when it’s accompanied by flat or rising rates of growth - is very beneficial, because it increases your purchasing power. If you earn $500 a week and prices are falling, you get to buy more goods with $500 a week. That is bullish. And the way to increase people’s purchasing power is to allow those corporations that are dead anyway (the deadbeats) and the banks that are dead (the deadbeats) to go under. Accelerate a little bit the deflation, accelerate the adjustment in prices, so that people’s real incomes will grow and it will turn the economy around. Japan is getting closer to that because they’ve tried now or 10 years to prop it up, rather than let it fall. And all they’ve gained is a huge increase in debt. Japan is now one of the most indebted nations in the world vis-à-vis GDP. The economy continues to maybe increase 1/2% or 1% a year and in real terms, per capita, Japan has been in a decline or the past year. The other thing is that if prices continually erode 1% or 2% a year, you tend to postpone your purchases until such time as you can get it cheaper. That holds back from spending. If, on the other hand, prices drop all at once by 10% or 15%, then you say to yourself, “We’ve had the drop. I can now safely buy.” So a slowly-falling price level is negative for consumption because it lulls people into feeling that it will continue. What you need is or the price adjustment to take place quickly. Once that happens, people are more eager to take advantage of bargains. The price mechanism has to work unhindered. You cannot try to hold up, because by holding up prices, you are postponing the true adjustment. So the easy way out or Japan today would be or the central bank to keep producing low rates of money growth (about 2%, 2 1/2% a year) and just pull the plug on 70% of their banks and all those corporations that have made bad investments and are broke anyway. Let land prices come down. And let all this happen in a short time, six months. Then you’ll see Japan’s economy turn around in a big way. The Japanese have a lot of savings. They’re very frugal people. When prices reach the proper level, I think you’ll see a lot of buying and the economy will turn around. And if they do that, the yen will get very strong - go from 120 to 80 in a very short time. But Japan is doing exactly the opposite of what you prescribe. Printing money is going to create a serious, serious problem. JGBs will collapse and the banking system, which is loaded with JGBs, will collapse with it. That’s all they need now. Not only will their loans be bad, but their portfolio investments will go bad. It’ll be a disaster if they go ahead and print money in a big way, like they’re talking now. The whole thing will just go up in fire. >>>