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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (10534)	3/20/2004 2:00:41 PM
From: grusum	Read Replies (1) \| Respond to of 110194

Steve, if housing crashes maybe we can turn to something else like was done in the depression. (CCC, WPA etc.) only this time, instead of building dams and roads, we might begin to repair the infrastructure and possibly build modern nuclear reactors to reduce our dependence on oil. (when oil prices get high enough people won't be fighting nuclear power). i wonder if these kinds of jobs would work now and if there could be enough of them... or if people would do them... everything has changed since then. best regards, -gru

To: Steve Lokness who wrote (10534)	3/23/2004 11:15:31 PM
From: Elizabeth Andrews	Read Replies (4) \| Respond to of 110194

Steve, There’s nothing to worry about as it's all a matter of recycling US$s within our fair country and recycling the same dollars within the global village of which we are the center and the driver-currently. Firstly, today’s wars do not suck up a disproportionate amount of commodities except cash. I remember the economics Prof in London telling us about inflation and wars and the trade off between guns and butter. And then Keynes saying you can spend your way out of any problem. The military of today has a large component of software so it is possible to have a huge military campaign without inflation in the classical sense as the power of software allows this. This is where the USA has spent its money, on the brains to create the (private enterprise) software to run these weapons. It now takes a much smaller percent of GDP to be a world power, if you know what you are doing. The USSR failed for many reasons but the simplistic one is that its military budget consumed too large a portion of GDP. The real problem was that they had an educated middle class with no way to express the creativity caused by the education system as there was no way to generate businesses and capitalize on new ideas. So it had to rely on occupation of countries and military action to drive growth not on the ingenuity of the people. President Regan’ s gang played this card perfectly as the Star Wars program accelerated USSR military spending when the real driver of the economy was in terminal decline, expressed by alcoholism and vagrant brains as there was no hope to improve one’s lot. The system didn’t work. That’s what caused the collapse. Remember that Afghanistan was the Soviet parallel to Vietnam but Vietnam didn’t cause our federation to collapse. So the military and its wars today are not causing the level of inflation they used to. The housing bubble is media babble as people like Noland and others are focused on the micro issue and not the macro. Housing can’t be imported and the public right now is choosing housing because it’s probably cheaper than owning the stock market as a store of wealth. It is no more complicated than that. The people who got crushed in the stock market bubble were ones with hyper leverage and if the housing market corrects as it surely will the people with hyper leverage will loose, but the economy won’t collapse because of this. Why? It is because no money leaves the system. Even all the people who bought Yahoo at the top didn’t cause a collapse because there was a seller who recycled the cash. The problems will occur if the Fed starts contracting the money supply, which they aren’t about to do. The nation is resilient and importing cheaper goods of all types will pull us through as the manufacturing countries want our currency. This is the engine of inflation, more than war as the distribution and pool of our currency is the problem that has to be addressed. The USA expects Iraq to repay the $200 billion or whatever the freedom number is, which is again normal for a conquering nation from the defeated. This time, however, it is difficult to call it reparation as it clearly has another meaning in that Iraq was not conquered but what happened? Secure oil but not cheaper oil you should note. So I’m just buying companies with reserves of gold, silver, copper, nickel and crude oil. This is not a portfolio that’s expecting inflation but is expecting a robust increase in demand for all these at a time when supplies are short and central banks are confused. There will be larger economies than the USA and it’s going to happen sooner than most think. I may not see it but check out the demographics-the world has changed.