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To: Jim Fleming who wrote (275550)	1/29/2004 10:45:44 AM
From: zonder	Respond to of 436258

Higher interest rates are very inflationary to the point where they cannot be passed on and then become deflationary Just how easily do you think any cost increase can be passed on to the consumer who is already loaded up to his proverbial gills in his own debt, not to mention laid off without a hope in sight of finding a new job? Or even if they do try to raise prices, for how long will that hold before demand plummets, a month or two? And when interest rates go up, how will the leveraged US consumer use whatever cash he has at his disposal? Will the priority be to pay back part of his debt or to consume the higher-priced products of some company like there is no tomorrow? In any case, the market looks ahead. Yes, some lucky companies can temporarily increase their prices, but overall the effects will be muted and it won't last at all. As expectations for higher interest rates increase, so will the expectations for higher inflation decrease.