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

To: Zeev Hed who wrote (15697)	5/13/1998 1:03:00 AM
From: Mike M2	Read Replies (2) \| Respond to of 18056

Zeev, I don't recall who coined the phrase bonds are "certificates of confiscation" but it has been true for most of the century in many nations . It refers to the governments propensity to inflate away (devalue) their debts and the bond holders get pay back in currency that has lost purchasing power. Yes the government has the power to tax overtly through the revenue dept. and covertly through inflation. I do not accept the price level of consumer or producer goods as the only measure of inflation. I agree with the Austrian economics view that inflation is the expansion of money and credit beyond the needs of economic activity. Monetary inflation can also lead to rising asset prices (stocks). The US 1920's bull mkt and the Japanese bubble mkt occurred in the abscence of consumer price inflation. Your scenario of lower interest rates may come to pass. I have not decided if we will see stagflation triggered,in part, by the governments attempt to stave off deflation before deflation takes hold. Look at the rapid money growth in Japan -yet it has not helped. The Economist has two good article 5/9/98p.78 and my favorite "america's Bubble Economy" 4/18/98 p. 15 - I think they have been reading my posts-g- one point about bonds some people tend to focus on the return above inflation but tend to overlook the supply/demand equation -How long will foreigners subsidize our debt driven consumption binge. BTW did you read the Forbes article5/18/98 about stk options accounting gimmickery? In the same issue check out David Dreman's "It's Tulip Time on Wall St" ho ho ho The baby brats will scream when their Ponzi mkt collapses -g- Both the Economist and Forbes are on line. Later Mike