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To: Rational who wrote (5834)	1/7/1998 2:40:00 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 27307

Sankar, check your inflation figures. In 1996, the US CPI and PPI rose throughout the year and were running about 3% and 2.5% respectively at the end of the year. In 1997, both fell throughout the year with CPI below 2% now and the PPI in negative territory for most of the year and still falling. How do you read this as 3% inflation in the US? Furthermore, I'm talking expectations. A year ago, most expected inflation to rise a little or at least not go down. Greenspan thought so too, raising interest rates last spring. Now, only Jimmy Rogers sees any inflation. As for US competitiveness, maybe Toyotas will get cheaper and upset Gephart, but many sectors of the US economy will benefit from imported deflation. Take computers, for example. Michael Dell says that a majority of the components in his boxes come from Asia, but only 6% of his sales go back to Asia. He (and CPQ, HWP, IBM, etc.) can slash prices and make more money as he (they) stimulates demand. I don't see Greenspan caving to protectionist fears. BTW, the US trade balance has been deeply red for a decade and a half and few voters listen to protectionists anymore. Remember Perot and the "giant sucking sound"? The only sound the voters heard was laughter. Another thought - remember a few years ago when Treasury talked about shifting to shorter term borrowing to reduce interest costs on the national debt? Did they do that? Not sure, but to the extent they did, the taxpayer benefits as we (taxpayers) are not short as many high coupon long bonds in this falling rate environment. Now, if they start to move the borrowing back out the yield curve, we lock in lower rates and the cost of servicing the debt doesn't grow. The budget surpluses continue, the debt shrinks, the supply of paper dwindles and rates stay low. Rosy, huh? Except for the stock market, that is. Bob