Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Abner Hosmer who wrote (10528)	4/25/1998 3:56:00 AM
From: ahhaha	Read Replies (1) \| Respond to of 116764

Long bond prices are a function of inflationary expectations. Rising short bond prices initially cause long bonds to rise because of disintermediation and uncertainty, but rising short rates which central banks control, cause inflationary expectations to fall and results in sending the long bond yields down. Central banks can't control long bond prices. You can't push on a string. The central bank can make money available and can encourage private banks to lend it by making the raw reserves cheap enough to invite borrowings, but that doesn't mean the market will borrow or that the private banks will chase borrowers. If there is justified fear about the ability to make interest payments or return of capital, neither borrower nor lender will be. The entire 20th century has been built on this borrowing business mainly because the world has been on a witch hunt against capitalism and therefore abhors savings and equity funding, but also because borrowing gets you the goodies now. I want to emphasize again that there is no true disbalance in trade, i.e. if you look at a long term chart of the yen and a corresponding chart of our current account deficit with Japan or with the total deficit, you'll find no correlation. Go back 20 years. It looks like a roller coaster while the deficit in constant adjusted dollars went up in the '80s and is now slowly flattening. In the last 7 years the deficit has been big, but the dollar has soared. The reason why is because the US has pursued constructive fiscal and monetary policies. The Japanese have not "pushed" their rates down. Their rates are low because of their incredible efficiency. That means their society spins off tremendous quantities of value, cash, that can't be utilized and so the rates on borrowing are low and there is no inflation premium. Their so-called deflation is not of the variety of the reliquification following over extension and it is valid to print money to stimulate action which revives the loan demand. The BOJ has started to do this in the form of protecting the yen. The threat about printing comes later if and when the purpose of doing it initially is forgotten, and printing becomes business as usual. Then when everything else is cooking, you don't stop printing for fear that the good times will fall apart. We went through that here over 50 years of mess. The Japanese have studied us closely and fear to tread where fools have gone. So they don't overtly print. The only way to get long bonds up in yield is to do the above. Why do that? Why sell LGBs? Get the gov. out of the market. Prevent gov from borrowing in the private markets. What are they doing there anyway? Need money? Raise taxes. With everyone wealthy in the country you raise taxes from 1% to 2%. No complaining. No one minds. Everyone isn't wealthy? Practice free market capitalism and watch how the wealth grows. In comparison to 20 years ago 90% of the Japanese are wealthy. The problem, if you could call it that, is what to do with all this money? They corral 50% of the world's wealth. But the dough just sits in banks. How do you get people to take money out of banks and spend it? Why is it necessary to do that? Because it's bad. Our Congress spends billions of hours computing who is going to get hurt and then spends billions more writing laws making sure no one is hurt. Everyone is hurt or not regardless. It reminds me of Japan. It's so bad there. Suicide rate is up. Terrible economic times. Everyone getting hurt. Life is horrible. No more $1 billion vacations to Hawaii. No more Thai whores. No more orbiting coffins. Only the Japanese teenagers can't figure out why their parents think it's so bad. Everything seems fine to them. Of course, they're naive. What do they know. They are just seeing and believing. They don't know the profound truths coming from the media mind about how bad things are.