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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (15688)	5/11/1998 10:50:00 AM
From: Zeev Hed	Respond to of 18056

Mike, I think it is the balance in flow of funds that count. As I have explained once before, we pay out something like $300 Billion a year in interest on our existing debt, a bunch of this money is simply ploughed back into the same securities (rolled over), furthermore, bill that are coming due are also rolled over (we pay out the bill and the recipient turns around and back buy back the same amount of bills). The problem is that in the next quarter we will pay out about $100 Billion more than we will be willing to sell. That creates a shortage of about $400 billion (assuming that this $100 Bill will be for the whole year). Some of this money is being consumed (retirment etc.) but the consumed money is well balanced, IMHO with "new money looking for a place to get returns in the 6% when inflation is only 1.5%. Thus, IMHO, we will have a shortage of treasuries and when you have shortage, the price goes up (and interest rates down). I have not even considered the few trillion yens that have left Japan in the last month and that may (or may not) continue to flow out in the next few months. Zeev