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

To: Maurice Winn who wrote (13899)	1/25/2002 7:23:53 AM
From: Ilaine	Read Replies (3) \| Respond to of 74559

>>Producers produce more stuff to satisfy the buyer. Production goes up. That's a boom.<< Or maybe it's a permanent change in consumption patterns. People who used to own one t-shirt and one pair of jeans start buying lots of shirts and suits and shoes and underwear and ties and golf shirts and slacks, etc. As for the "wealth effect," that's one of those touchy-feelie things like consumer confidence, irrational exuberance, and animal spirits that I tend to discount. I know how real people borrow money in the real world. They have to fill out forms that show their income, expenses, and assets. When the assets go poof, then the balance sheet doesn't look so good anymore. Then they aren't as credit worthy, and either can't borrow as much or else have to pay higher interest rates. There's nothing mysterious or touchy-feelie about it. And if they don't have to fill out a form to show to a lender, then they do the same process mentally. Rich people borrow more money than poor people because they can pay it back, and they know they can pay it back. But if it makes you feel better to call it the wealth effect, go ahead. I know what you mean. Anyway, we never did figure out how much market cap went to money heaven and how much went into the money market. I have never been able to figure out how to measure that.