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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (11144)	11/18/2001 2:52:17 PM
From: Maurice Winn	Read Replies (2) \| Respond to of 74559

<It is useful to recall that in the last major bout of deflation that we endured, that the price of oil also collapsed. To 10 cents per barrel on the spot market in 1930. This provided no stimulus whatsoever to the general economy. They say today is different. > Count the SUVs per person today, then count the number of cars per person then. Also aircraft and heating of buildings. Actually, the world's economy is much less oil dependent now that a couple of decades ago, but it's still a significant part of what we buy [including hidden oil such as steel processing, electricity supply]. Since the oil is sold by OPEC rather than the Texans, the economic impact is quite different too. The Arabs use their money to buy Kalashnikovs for Osama and F16s for their air force. The Russians buy political stability in their country. Keep in mind too that we haven't had deflation and Uncle Al is printing money as though there's no tomorrow so it's not likely that we will see a deflationary implosion. People are buying flat out in the USA. They need retail therapy after a couple of months of drama. 95% of them are working and earning similar incomes to previously. 1% of them have lost their jobs. That's not a lot. Lots of useless jobs are not being done now [such as designing Internet businesses with no prospect of profit] and those people are being redeployed into useful activities. SUV owners will have a significant extra bit of money in their wallets [or more accurately available on their credit card accounts] and they'll buy stuff with the oil savings. With mortgages refinanced at low interest rates, they'll have a lot more money too. Though, on the other hand, the people who lend them the money will have their spending power reduced dramatically and the tax take from the interest charges will be dramatically lower so government spending will be down too, except that they can spend all those newly printed $$ that Uncle Green$pan is producing so they'll be okay. The real losers will be the savers who hold cash and lend it expecting to live on the interest. Mq