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To: Investor2 who wrote (9546)	11/11/1997 12:40:00 AM
From: Patrick Slevin	Respond to of 17305

Tough night....had to go to a bachelor party where there were over 50 guys.... but only 4 of us did not have a vowel at the end of our names...2 of those guys were over 50 (60?) and the third was the groom. Anyway, the younger group (thankfully) got me the hell outta there but to a bar where I had to save the youngest of the turks from a fight... ...Hey, maybe I'll get free canoli tamarrah!! So I am dim on the question....I think what I was trying to say was not that reducing rates in and of itself is deflationary but that, if one agrees that there are deflationary trends, particularly in foreign markets, a reduction in yield is an affirmation that deflation is a good thing. This is not a message that the FOMC will send. Further, to go back to my other remark that bonds sometimes detach themselves from the stock market, if a relatively safe investment like bonds increase in value money will migrate from the market into bonds. So the theory that low yield helps the stock market may not be what bullish investors think it will be. Did I spell everything right up there? These Mediterraneans put so much spice in their food I think my brain is on fire.

To: Investor2 who wrote (9546)	11/11/1997 12:21:00 PM
From: Patrick Slevin	Respond to of 17305

I2 As chance would have it, I just stumbled on an article in US News (I'm way behind on my reading) from Oct. 27th.....nice timing....page 65, *"If Prices Fall too Far, duck"* paragraphs 3 and 4, "Low, low rates". No major nation suffers from deflation, but Japan comes close. For the past six years, Japanese consumer prices have risen an average of 1 percent annually, the stock market has plunged 50 percent, and economic growth has been minimal. Retail sales are down 4.5 percent in 1997, and in the second quarter, gross domestic product fell at an 11.4 percent annual rate. Low, low rates. The normal cure for slow growth is an interest rate cut, which encourages consumers and businesses to borrow and spend. But, as a headline in Bridgewater Daily Observations, a finacial newsletter, put it last week, "How do you stimulate an economy when interest rates are already at 0 percent?" That's almost literally true of Japan. Last week, the Japanese short-term lending rate was 0.4 percent, compared with 5.5 percent in the United States. The prime rate, for the best corporate borrowers, was a mere 1.6 percent vs. 8.5 percent here. Further, the article notes that the US has not suffered from deflation since the 1930's, but economists still aren't sure how the world managed to claw it's way out of it. Unfortunately, the remedy may have been war. The article goes on to infer that increased productivity would keep the US from a deflationary cycle. Personally, I did not mean to give the impression that the US would suffer deflation, just certain global regions.