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To: patron_anejo_por_favor who wrote (127439)	10/4/2001 4:34:29 PM
From: Tommaso	Read Replies (2) \| Respond to of 436258

On the whole I agree with you, but a lot of that monetary spike was immediate loans to banks to make sure everything stayed liquid in the wake of the WTC disaster--and also a lot of money went into short term savings accounts (see the other charts from the St. Louis Fed). The spike may reverse as fast as it occured. That, however, does not change the general pattern of extending credit to almost anyone who will accept it. Let's see, if the dollar drops 20% against all other world currencies, that means a 20% markup on all imports, including oil. That in turn means a cut in spending for imports, sending some other countries into severe recession or else forcing them essentially to give away their goods with no profit. (I think that the United States has enough clothing to last for several years with no new purchases, except for shoes.) Countries hoping to emulate the Japanese exporting miracle of the 1950-1980 period will have to adjust their economic activity towards domestic goods and projects. But a 20% drop in the dollar could mean a huge boom in US agricultural exports and forest products. That would be inflationary for our home markets as well, raising the cost of food and housing. Seems to me everything begins to point to inflation: money supply, "war" (whatever that turns out to be), fiscal stimulus, etc. And that means the Fed will be forced to reverse agains and raise interest rates. Looks terrible for equities for a long time to come, though there will surely be big bear market rallies. Got LEAP puts on the Dow for the year 2004? That's a lot harder to say than "Got GOLD?" but seems more certain to me than gold. Gold may do OK until the producers start making money, at which point they will start making more gold.