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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (1450)	5/18/2003 5:30:49 PM
From: UnBelievable	Read Replies (1) \| Respond to of 4905

It Would Seem The two things that constrain the Fed from inflating as much as they like are two adverse "side effects"; -Fall in the strength of the dollar, -And, increase in long-term interest rates. It seems that they are doing what they can to minimize the extent to which their inflationary money policy provokes either of these two demons. With regard to the fall in value of the dollar there has been a concerted effort to publicize the advantages for this country (increased exports) and disadvantages for other countries (decreased exports). Clearly the hope is to persuade the EU and other countries to similarly inflate and thereby stem the loss to the dollar. By raising the specter of deflation they are able in the very short term to talk long-term interest rates down, as has been the result of their talk about buying longer term paper. Such intervention in the long-term markets by buying paper is a similarly empty threat. The Federal government is going to have to issue a significant amount of new debt to finance the growing deficit. Where exactly does the Fed get the money to buy all of this new supply and perhaps some of the existing long-term debt? Particularly as foreign nationals increasingly are selling debt because of the declining value of the dollar. It should be clear that a bet on long-term interest rates staying down or going down further is a bet against the Fed printing as much as they can. It seems like this is a fools bet given the Feds prior history of papering over all problems as well as the Federal governments historic inability to limit spending.