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

To: Maurice Winn who wrote (14605)	2/7/2002 11:21:01 PM
From: LLCF	Respond to of 74559

<I explained in an earlier post how the dot.com bubble formed without any control by Uncle Al. If people get it into their stupid heads that they are all going to be rich if they buy gold, then a bubble will form and the price of gold will zoom to $1000 an ounce. > Well, sure, except that keeping interst rates lower than would otherwise be the case makes the mal-investment bigger... people decide WHERE the bubble will be for sure. I agree with your idea that the next bubble will be gold, as paper assets prove to be trojan horses. The point is, with higher rates, smaller bubbles, if any would have been the case. <Given the growth in the world's economy and the increasing use of the US$ as a means of exchange and store of value [unwise in my view, but that's another story], there was good reason to increase the money supply. Namely, to prevent extreme deflation as a constant supply of money chased a rapidly increasing supply of goods and services as 6 billion people increasing became part of the modern world's globalized economy. > Agreed, that there is a moving target there, and it would have been easy to be too tight given the situation, although arguably other currencies & gold could have filled the gap, we took advantage of the situation. The fact is however that all those dollars are liabilities of the U.S. Govt. so 'good reason' is debatable at some point. <It's just the madness of the mob. Uncle Al can't do anything about it, other than rant about irrational exuberance, point out the risks of madness, raise interest rates to try to prevent huge borrowings to buy a share in the madness, cross his fingers and hope that the mob doesn't take it too far. > WEll, this is simply untrue... as evidenced by what he DID do [too late] and what happend. <A clue is to check out the serotonin reuptake inhibitor levels in those who bought dot.com shares after 1997. > Agreed, except one could argue that there are ALWAYS suckers to buy this stuff... the fact that these companies got funded [by the nice falsly low rates] and went public is testimony to increased optimism created in part by the constant sale of "Greenspan Puts" at every turn. Let what should have happend in '98 happen, and you may never have had the .com bubble... sad but true. DAK