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To: NOW who wrote (92914)	7/31/2001 2:19:02 PM
From: Sharp_End_Of_Drill	Read Replies (2) \| Respond to of 95453

David D, I don't even pretend on my best days to understand the mechanics of vast economies and inflation. I just know that bubble stock valuations cannot exist with either stagflation or the rate cuts eventually needed to quell the disease. I'm hoping that knowledge will be enough. Sharp

To: NOW who wrote (92914)	7/31/2001 7:43:07 PM
From: isopatch	Read Replies (2) \| Respond to of 95453

Dave. Been "a given" ever since the Federal Reserve was set up in 1913. Don't have time to go into a lot of detail. Suffice it to say that many excellent books have been written detailing how, from it's creation, the Fed possessed the ability to baloon the money supply making it a potential engine of inflation. Or contract it and bring on severe recessions. The key, though certainly not the only, variable in the equation has been the willingness of the Fed Chairman to inflate. AG began his term following the path Paul Volker had established during the early 80s. Careful control of the money supply and inflation. However, as his term wore on, AG increasingly succumbed to the temptation to over manage as so many Fed Chairmen had before him. After helping to guide the global economy out of the 1998 crisis, he injected large amounts of liquidity into the banking system to combat a non-existent Y2K threat. This over stimulation gave us the bubble economy. That, in turn, painted him into anther corner. So, he ramped up rates to correct his own mistake. With an extremely over leveraged economy running on too much private debt for years the result was a greater than anticipated reaction to the downside ala the current recessionary environment. Becoming increasing extreme in reacting to each new unwanted economic swing the Greenspan Fed is now providing the highest monetary growth in 20 years! The is "the new era" that only a small %age of current investors are in any way prepared for. The last Fed Chairman to engage in this kind of policy was Arthur Burns in the 1970s. And the result now will again be higher inflation with slow economic growth, aka stagflation Economist Stephen Roach has written extensively on the dynamics of the current situation and explains it far better than most other members of the financial community. Cheers, Isopatch