Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Raymond Duray who wrote (11238)	11/23/2001 3:29:47 AM
From: Maurice Winn	Read Replies (3) \| Respond to of 74559

<I'm inclined to see the willingness of Greenspan to use the full faith and credit of the American public to kite an overvalued stock market as a bit unseemly> I really think this is a much bigger game than kiting a stockmarket, albeit a big stockmarket. I think for the past couple of years we have been teetering on the edge of deflationary precipice and Uncle Al is well aware of that. He would prefer a nice stable earnings rate and none of this mayhem, but he has to deal with what's real. I agree with you that inflation [or currency dilution] is no use to me [though I don't mind profiting from knowing to expect that but it's more of a guess, fraught with risk, compared with staid stockmarket investments at reasonable P:E]. If the world's economy goes beyond a deflationary event horizon, the consequences of a deflationary implosion could be unimaginably bad. The world is a huge realtime experiment and we are now in a situation unparalleled in biological history. 6 billion people [many times more than were alive in 1929], living in huge cities, dependent on technological marvels which didn't exist supported by dodgy financial systems. A steady percentage is a very nice thing to have in such a situation rather than economic spasms. If the E in the P:E is doubled by way of $$ dilution, then suddenly a P:E of 20 becomes a P:E of 10 without any actual increase in economic activity. Just a change in the way E is defined. Very sneaky! In a deflationary environment, I can imagine the E could be successfully doubled without causing inflation by the simple expedient of doubling the number of dollars [which wouldn't really be needed because what's really needed is a doubling of money velocity rather than the actual dollars - one dollar moving at the speed of light would be enough to handle the world's transactions - hmm, actually, it wouldn't, but maybe a couple of million dollars would do it. Maybe a 20% increase in money would cause a doubling of the E]. I'm making up this economic stuff as I go, so maybe a real economist can tell me if this is right. Mqurice