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

To: philv who wrote (31151)	4/25/2005 12:25:51 PM
From: ild	Respond to of 110194

IMO lower interest rates will kill USD (like $150 oil) and higher interest rates will kill the bubble economy. Instead of taking some pain two-three years ago the Fed decided to gamble and aggressively lowered the rates. They tried to jump start the economy. IMO they are about to lose in their gamble as lower rates have only produced new dangerous bubbles. The Fed is not omnipotent.

To: philv who wrote (31151)	4/25/2005 5:58:18 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 110194

Higher interest rates in Japan would have allowed a normal de-leveraging to occur. Many businesses, banks, and individuals would have filed for bankruptcy and would have continued life with reduced debt. Uneconomic businesses would have closed. Rather than face this reality, they dropped interest rates to zero. As a consequence Japan has suffered 15 years of stagnation and decline, yet they still face a future de-leveraging. As Harvard economist, Joseph Schumpeter, said "Policy does not allow a choice between depression and no depression, but between depression now and a worse depression later. Inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar (WW-I) experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy. For recovery is sound only if it does come of itself. For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another worse crisis ahead." .