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To: pater tenebrarum who wrote (128578)	10/10/2001 7:29:44 PM
From: yard_man	Read Replies (1) \| Respond to of 436258

Great post ... >>the government after all borrows its funds from the same pool of savings for which the private sector also competes<< meaning real goods and services, not just balances on someones computers, right? And that is the point, isn't it? The fact that fiscal stimulus is being resorted to after the failure of monetary stimulus is enough. They've lost -- it was inevitable -- at least from the decision to paper over the melt-down in 1998. Japan can desperately buy dollars all they want ... that's going to fail as well -- doesn't matter how big their reserves are.

To: pater tenebrarum who wrote (128578)	10/10/2001 7:38:15 PM
From: sun-tzu	Read Replies (2) \| Respond to of 436258

Thank you very much for the eloquent post. I am truly envious of your ability to put those thoughts into words. I agree on every single point. Mike

To: pater tenebrarum who wrote (128578)	10/10/2001 7:39:01 PM
From: Mike M2	Read Replies (1) \| Respond to of 436258

Heinz, re: challenge to the US$. Imagine if future US military strikes enrage the Arab world and they decide to resort to economic warfare- "we will no longer accept the US $ for oil - we will only accept Euros or GOLD. Mike

To: pater tenebrarum who wrote (128578)	10/10/2001 8:09:25 PM
From: Mark Adams	Respond to of 436258

in a macro-economic sense it doesn't really matter which portion of the population is holding and/or depleting savings - the fact remains that they have been depleted during the boom... you say consumers are in better shape than presented by the bears - i'm not sure what you mean by that. better shape in what way? the record indebtedness of US households relative to their income is an irrefutable fact. Only if you refute the argument that increased tax burden has created a statistical artifact can you accept this as true. We know taxes as a percent of disposable income has increased. This decreases the denominator in many of the factors cited- ie debt to disposable income, debt service burden and so on. Even without this artificial depression of NIPA income, the debt service burden is a mere 1/10 of a percent higher than a previous high seen in the 90's. What depresses NIPA income by raising the tax burden? + Taxes on capital gains from Equities & Options + Additional taxes paid on conversion of IRA/401k money to Roth Legislation changes reduced both the capital gains tax & made it possible to pay deferred taxes on retirement funds- converting those funds to high powered money (tax free growth vs tax deferred growth). This created a booster shot for the government finances (and a surplus). They also eliminated gains on primary home sale. Most of these moves benefit the early boomers at the cost of future govt revenue- which should be the real concern. While you can say it doesn't matter who is saving less, it does matter if wealthy folk are saving less because they are paying more taxes on increases in wealth which don't show up in the equation. That's my point- we have a flawed statistic which we base our discussions on. This increased tax burden should be reduced as of last year, when capital gains got a bit harder to come by. On the balance, I agree that corporate finance took on debt to improve leverage and ROE. In some cases, perhaps too much debt. I don't see the same situation in consumer land, except for the 10-15% of the population that manages to have these kind of problems regardless of the economic situation. Regarding the reserve currency issue, I agree that the demand for dollars may drop. Thus far, bets against the dollar haven't been that profitable for me though. When the dollar drops, I don't think I'll point to the trade deficit as the proximate cause. That's another case of looking at one statistic in isolation (ignoring foreign affiliate transactions, service account, and capital account etc). Pointing at the trade deficit saying it's not sustainable seems to be relying on too simple a view of the real world. Regarding interest rates as an indicator, I'd feel better about a longer term deflation call if long term interest rates were trending down. Could be that disbelief reigns. Or maybe a 30year bond holder expects 2 years of deflation and 6 years of inflation, therefore demands a premium. Too tough for me to call. Short rates are depressed due to a flight to safety, so I can't rely on them much unless they persist. BWDIK?

To: pater tenebrarum who wrote (128578)	10/10/2001 8:29:29 PM
From: Dr. Jeff	Read Replies (1) \| Respond to of 436258

A nice summary from today's Fleck: "Brokers are working overtime to think up reasons for people to buy stocks. State pension funds are buying stocks. Domestic institutions are redeeming large amounts from fixed income managers to put into stocks. The U.S. government is encouraging and facilitating stock buying by corporations. We are witnessing a globally coordinated effort to use stock markets as the primary tool of economic policy. Monetary and fiscal stimulus will increase globally, i.e., massive amounts of money will be printed and spent. These efforts will succeed for a period of time, but create conditions for a worse global economic and financial crisis than the one that would result from allowing markets to normalize now." "The Internet services sector is today's best performer so far. People have clearly decided it is time to buy the biggest pieces of crap they can find, because these will rally the most. There is a high and rising level of confidence that global economic cooperation/rhetoric/manipulation will be as effective in pushing up the risk asset markets as it was in 1998. We are entering the 'political-will-dominates-economic-reality' phase. Yes, for a while."