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

To: yard_man who wrote (1711)	5/22/2003 11:38:28 PM
From: UnBelievable	Read Replies (2) \| Respond to of 4912

Let's Assume That The Federal Income Tax Is Cut 50% The government keeps spending at the same level. This results in a lot more dollars in consumer and company pockets. It obviously also results in a lot more debt - government debt. Nothing has changed otherwise. So now there are more dollars chasing the same amount of stuff. So price increases. Given the government's willingness to spend with a deficit, and the Fed's willingness to print (at least each gets to do the one thing they know how to do) there can not be deflation. Pressure on the dollar? well if the rest of the world doesn't know how to take a joke nuc em. Long term interest rates get to high? The Fed imposes price controls on interest (or intervenes in the market same thing). When all else fails there is wage and price controls (once you have price controls on stock and long term debt what is the big deal in having some rules about soup. What a tangled web we weave when first we practice to deceive.) Even without deficit spending though, unlike the Japanese who have a strong cultural value of honor and equate paying back loans with honor, not to mention generally being very risk adverse, and therefore are very reluctant to borrow under uncertainty Americans are risk takers and they will borrow first and pay back later - individuals and corporations alike. So I don't see a scenario under which we have to be burdened with deflation. Inflation, slow growth, a depleted capital store - sure. The fact is the market doesn't expect deflation. Stock prices do not rise, or even stay constant, in anticipation of a deflationary environment. Neither do I see people rushing to sell their houses so they can buy them back in a few years for less. AG should be careful about the deflation talk though - since it can be a self fulfilling prohesy (although born of expectations it would be short lived and itself bubble like). OK people don't sell their house. But they delay buying a new one. Or they continue to rent. Or they buy a smaller one since they understand that it will depreciate less than the big one they want and they actually will be able to buy the big one for less in a few years. etc. He should also put a little interest in long term rates. People look to the markets to tell them the future. Anyone looking at the debt market today would have to conclude that there is a bad storm rising. He should probably do that today unless he wants to ruin Memorial day weekend retail. The price of long term debt now is an anomaly or a intentional perversion and in either case a bubble. Don't let AG tell you otherwise. That guy he wouldn't know a bubble if it came up and bit him. Inflation - count on it.