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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: reaper who wrote (5183)	8/26/2002 12:38:09 PM
From: yard_man	Respond to of 89467

>>as far as the foreign fund flows, IMO the slowing of foreign fund flows will be coincident with a contraction in imports as the boomer bubble-holics start their 12-step debt austerity programs. so no dollar 'crash' and no rate increase to 'defend' the currency; it'll be decently balanced with the dollar falling in stair-steps another 10%, maybe as much as 20%. i would also note that there are SOOOOOOO many people saying rates will go UP 'cause Greenie will have to defend the dollar that even if i didn't have an opinion on a mechanism by which this would not happen i would STILL bet against it. << First view is consensus, i.e. a steady slow adjustment in foreign investment flows that track import declines. I AM still in the hard core deflationist camp -- for almost everything -- but not "consumption" items. I also don't think Greenspan will raise rates to defend the dollar -- what power does he have anyway -- all he can influence short rates -- markets control the rest?? My view differs from yours in that I don't see foreign flows to USD assets as being stably coupled to our imports. Countries can and do change the amounts of currencies they hold in reserve -- though they haven't made large changes in years. I don't know when, but I suspect that flows will slow and perhaps even reverse before the consumer sucks it up. Also, it won't take many foreign concerns to divest at the margin to create havoc ... The supremacy of the buck has come in a very non-linear fashion -- to think that the adjustment to the reserves held by other countries, could be linear seems naive to me. I think we have counter-cyclical sale on the bonds coming before yields approach their ultimate lows -- maybe the 10yr hits low 3.xxx's but not for 18 months or so. I think yields will head back closer to 5% first. At the same time housing and autos will go in the can.