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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (94512)	2/16/2002 12:10:15 AM
From: Nadine Carroll	Read Replies (1) \| Respond to of 132070

I suspect that the way out is good old inflation. Cut the real value of the dollar an average of about eight percent a year for five years and the public's general perception will simply be that prices are rising. Even a 1% per month CPI change does not cause instant hardship and allows time to make adjustments. That nicely sums up why I have been unable to believe the various wise seers warning of the dangers of the current deflationary environment. TIPs, anyone?

To: Tommaso who wrote (94512)	2/16/2002 10:09:32 AM
From: valueminded	Respond to of 132070

Tommaso: I agree and think that our politicians realize that the best way out will be general overall inflation... I think Greenspan believes this as well... The issue with inflation, is that you will find a number of Americans with fixed rate mortgages thinking this is not so bad..... As their "mortgage debt gets inflated down" and their "real estate" and hard assets maintain par with inflation. If you consider that the mortgage on the average american house represents shorting of intermediate and long term bonds, I think you have a compelling case for devaluation of the dollar... Yes those holding our long term bonds will get crushed . . . but the alternative which is a deflationary spiral in which the monetary authorities lose any hint of control is probably the least palatable alternative.... imo I think the other compelling arguement in this case is that Americans are not yet paying for the true costs of most services... With accounting gimmicks allowing manufacturers to post "pseudo profits" coming to an end, I think you see a case where prices start rising. Some of the profits may go away when technology workers start demanding monetary renumeration instead of relying on options to make up the difference. Additionally, if companies are so profitable, why do they need to continually issue bonds ...... Me thinks that many business models are not generators of excess cash flow over and above the perceived capital investment requirements. As the ability to borrow goes away, it would seem that companies will be forced to raise prices, cut services or cut investments. They have already done the latter two, I think price increases are next... just my opinion