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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (2908)	9/26/2002 9:39:02 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 57110

prudentbear.com did you happen to see this? (btw, entire article worth the read...not too long...gotta run..talk to you guys tomorrow!) The foreign purchase of U.S. Treasury bills, notes, and bonds facilitates government spending; foreigners now hold more than $800 billion of U.S. government debt which is serviced by tax funds. If foreign investors should ever tire of financing the deficits, the U.S. dollar would come under pressure. In fact, it would fall, if foreign holders should lose confidence in the dollar and begin to liquidate their dollar investments. The flood of imports would subside, American exports would increase, and goods prices would soar. In recent months the U.S. dollar has fallen substantially versus the euro, the Japanese yen, and the British pound. While further interest rate reductions by the Fed may accelerate this fall, they may not cause many goods prices to rise. On the contrary, a recession may initially overwhelm the forces of inflation and develop symptoms of contraction. Distress and liquidation sales tend to depress goods prices as do producers and consumers clinging to their cash holdings. A growing demand for money obviously increases the value of money and depresses goods prices. In popular jargon, a recession may usher in "deflation," no matter how frantically the Fed may inflate its stock of money.