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To: Michael who wrote (7765)	2/22/1998 3:44:00 PM
From: Albert V	Read Replies (1) \| Respond to of 116764

Michael, regarding #1, I would say that USA is not an island, would be great if money supply determined dollar value, but, short term anyway, if other countries are willing to take on dollars you can have high money supply without a lot of inflation. I feel that Japan is trying to do this now. Read in Barrons that Japan had been inflating their money supply at a rate of 1% PER DAY, in January, which you would expect to kill the yen in value, but low and behold, here on SI people have posted articles which state Japanese officials now want the yen to play a larger role in backing Asian currencies. Guess this means that the others will have to absorb yen in order to do this. Keeps yen up, inflation down. Regarding the collapse of commodity prices world wide, remember the tremendous advances in technology in recent years. We can now extract minerals, at tremendously low values, economically. With the demise of the cold war and opening up of world trade we now can exploit resources in far off areas that have never been looked at before. The world is awash in some commodities, nickel for instance, now being exported from Russia since they no longer build tanks, making prices crash. PEACE is BAD for commodity prices, lots of plans, investments in areas are made that could never have been done before. Think Mongolia, China, Laos, Angola, South Africa, Cuba (for non Americans) Iran coming back onto the capitalist stage. Also think of geological prospecting with satellite maps, advanced geochemistry etc, at the same time that growth in the economies are more into silicon wafers and not rail- heavy industry. Used to be hard to get commodities, not anymore! Place this against the economic backdrop. We ARE at the end of a great inflationary era where prices go up because there is too much demand ( in my opinion only, inflation due to mass money printing is NoT the same thing) At the end of WW2, the debts of the 1920s were totally liquated in the 30s, leaving consumers flush with cash and without debt in 1946, coupled with pent up consumer demand put off by the war. This combination of factors was very unusual! This prepared the way for the explosion of consumer demand in the postwar era, and the creation of excess credit (debt) to keep meet expectations exacerbated the expansion and demand for commodities. We will never see this again. See, if banks are loaned out, say, to %50 percent of the the deposits they hold in the bank, and after 40 years, this ratio has dropped to %95 loaned out (only %5 held in reserves) you can see that there isn't a lot ability left for the banks to increase the purchasing power of the population, who by now is burdened with sky high debts, and loan payments reducing their spending power. I am no expert- but the low interest rates are the only thing keeping the game going now. With higher interest rates the national debt will EXPLODE forget about the stock market! Remember that Clinton moved the USA debt from long term debt into short term bonds to reduce (temporarily) his payments. Now remember that the Japanese are trying to get their yen to back Asian currencies, and Europe is going on the euro. Wouldn't take much for them to send loads of US bucks back to USA, raising inflation and interest rates! This makes me think that perhaps countries like Russia, with their (l think) low levels of personal debt, could enjoy quite a nice expansion in their economy,someday. Hoped you enjoyed the read! Albert