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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Rmn who wrote (405)	1/3/1998 11:32:00 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 9980

Ramsey, I am not want to argue with afinancial genius like Rubin. Watch him increase the 30 years portion of the next few refinancing whe the yield curvbes no longer lower the cost of financing by using short term debt. By the way, I do not know how much of opur debt is long term and how much is short term. Does any one knows? Finally, Ramsey, let say you are right and let say fund these future liabilities now. Where the herll are we going to park that money so it has an acceptable risk free return? Zeev

To: Rmn who wrote (405)	1/3/1998 11:49:00 PM
From: Rational	Read Replies (1) \| Respond to of 9980

Ramsey: << This places the U.S. in a very precarious positon if interest rates should rise. >> Greenspan says (and I agree) that the real rate of interest will rise due to deflation. This can be serious because IRS will collect less taxes due to low corporate profitability and more unemployment, magnifying the impact of deflation on the govt -- more interest out flow than should be and less revenue. If deflation is really high, rational nominal interest rates could be negative, but negative rates cannot be attained because that will be like selling NEW government bonds at a premium to replace the existing debt -- but such bonds will have no demand, given opportunities elsewhere. If new bonds should carry a negative (or a small) rate of interest, where will the capital flow? Obviously, from the US to whereever investors can get more. A fall in the US$ value is incidental; it is a mere adjustment to other real phenomena emanating from deflation. If the FED artificially raises the interest rate to prop up US$, that will be a distortion and I know the Fed will not do so. Sankar