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

To: UnBelievable who wrote (1459)	5/19/2003 6:48:36 PM
From: Perspective	Read Replies (3) \| Respond to of 4907

<Then Why Won't They Be Able To Create An Inflationary Environment?> Oh, they will be able to cause inflation if they want to. <I don't think that it is as free wheeling as you describe. But to the extent it is clearly there will be no barriers to increasing the inflationary pressure.> Unfortunately, it is that "free wheeling" - they control how many bucks are out there, period. And so far they are fighting the deflation bogeyman without regard for the other more severe long-term problems they are creating. <The Fed can force long term interest rates below what they otherwise might be, but like all price controls it would have the impact of limiting the supply of capital. Ultimately it is capital which is responsible for growth and decreasing the incentive to capital formation hardly seems a recipe for growing the economy. > This is where they are shooting us all in the foot. The optimum course of action is a controlled deflating of the dollar bubble and trade deficit through gradually returning interest rates to market levels, not jamming them further and further below the free market rates. By reducing the return on capital to zero and below, they are insuring that capital formation will cease. In the short run, for a world awash in capacity, that may be the right answer. But what the hell is going to happen when rates must return to market-based levels again? It simply is not going to be possible without a depression. Thank you Greenspan, you short-sighted idiot. BC