Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Deflation -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (264)	4/21/2004 9:33:13 PM
From: JF Quinnelly	Respond to of 621

Greenie can't control the long end of interest rates. If he keeps short rates too low for too long he'll end up with an inflation premium being demanded by bond buyers. I saw someone suggest that short rates are below the inflation rate, which is unsustainable. To head off an inflation premium Greenie will need to slow down credit creation by letting short rates rise. Either way long rates will go up, how much they go up being determined by the bond market. The long rates we are experiencing may be the result of how the PRC is choosing to invest the dollars they are accumulating- buying Treasuries and Fannie Mae and Freddie Mac paper. If China slows down, either to cool their own inflation or because the American consumer is tapped out, then that could also push rates up. In SoCal some folks are using their homes like ATMs- houses are going up 20% per yr, so they just tap into that 'found money' with equity loans.