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To: Broken_Clock who wrote (21944)	5/13/1998 9:13:00 PM
From: waverider	Read Replies (1) \| Respond to of 95453

Papaya, you are wrong. The Fed is not printing excess money. If they were, we would have inflation. We don't. <H>

To: Broken_Clock who wrote (21944)	5/13/1998 11:00:00 PM
From: 007	Read Replies (2) \| Respond to of 95453

PK, I agree with Diamond on this fed stuff. In fact, the US never "prints" excess money, it just tends to spend more than it taxes. The difference is made up by borrowing, hence the monstrous national debt. The good news now is that even after debt servicing the government will not spend as much as it is taxing. That's a very positive structural development. That is part of the reason the market is so high. On the monetary side, by lowering interest rates the fed can cause the money supply to grow through increased private borrowing and investment. This stimulates growth and is a good thing as long as shortages don't drive prices up, such as the current shortages in the labor market. Greenspan has done a great job managing growth and inflation. He now has a new problem and that's the developing bubble economy. Stocks, and to a lesser extent real estate, are rising beyond any reasonable valuation. The difficulty lies in managing the economy in a way that maximizes growth while controlling inflation without incurring the risk of a major market collapse, which could indeed lead to a recession. Most everything in the economy is stable except for the market. The stock market is a larger concern than inflation. Think about it - everybody has their money in this thing while it's at record highs. America's retirement money is on the line. Lose half of that and the economy will slow overnight and so the downward spiral develops. America in the 90's is starting to look like Japan in the 80's. My advice is to get comfortable with the idea of shorting. We're not there yet, but it's best to know what the future is likely to bring. Meanwhile, the challenge for Greenspan is to negotiate a soft landing for the economy and the market at the same time. Let's wish him the best of luck. 007