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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (4044)	5/31/1998 11:28:00 AM
From: Bosco	Respond to of 9980

g'morning Zeev & all - Zeev, while there seems to be some relationship between surplus and subsequent recessions, one also has to marvel at the [now proven] unprecedented softlandings of the economy in the past several years. The skeptics have argued that it cannot be done, that boom-and-bust are the universal law of economic nature. To backtrack a bit, I agree absolutely that the Tower of Babel syndrome is quite ingrained in human nature, that irrational exuberance will inevitably bring about tragic ending - that even the mighty tigers and mini dragons are not immune from this miserable state. I suppose it is about the taming of the human ego. Unfortunately, we do have boatloads of those inside the beltway <G>. The saving grace is that we have a pretty good head-shrinker at the Fed to dispense necessary doses of lithium to contain these manic-depressive outbursts. So, the question is really if those self-serving egos are willing to listen to the good witchdoctor and to save the surplus for rainy days and they choose to squander it away to garner political capital <SG> Best, B

To: Zeev Hed who wrote (4044)	5/31/1998 12:06:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

Zeev wrote: >>When was the last time that treasury did not compete with other investments for investible dollars? Right now, not only the treasuries are not competing, but on an annual basis, the treasury is going to inject $350 billions into the markets ($300 Billions roughly in interest payments and $50 Billion in budget surplus, thus less need to roll over debt). We thought that $20 to $25 billions injection of new funds into the market was "awesome", I say we have not seen anything yet. Our budget surplus plus a very minute leak of Japanese savings to world markets are going to be explosive.<< Zeev, I didn't really forget to mention this aspect. You mentioned it already so I didn't want to say it again in my reply. I do agree with you. But I did want to ask you some questions about your comments. I don't quite understand why you said Treasuries don't compete. I mean generally speaking, people buy bonds and people buy stocks. One or the other. Slight swings in interest rates or perceptions about the economy makes money move in large amounts real quickly between the two. So what am I not understanding? Also concerning the budget surplus of around $50 billion. You are assuming we, US taxpayers, are going to get this back via lower taxes, then most will put our rebate(so to speak) back into the equities market? If so, this isn't a given yet. Congress may spend it for us. As far as the $300 billion, for those that don't know, this is the figure that the US government has to pay in interest to treasury holders, be they T-Bills, T-Bonds, or T-Notes. Another potential source of cash for the purchase of stocks. Thanks for your comments, MikeM(From Florida)

To: Zeev Hed who wrote (4044)	5/31/1998 1:17:00 PM
From: Mike McFarland	Read Replies (2) \| Respond to of 9980

Zeev, you said "In this country, budget surpluses have historically led to at least recessions, and bear markets" Which came first--how much of the surplus is taxes from cap gains? Maybe if the market crashes, the surplus dries up, and we wont have a recession hehe. ...and... "The recession results from the simple fact that the government takes out more money from the economy than it puts in, thus , in essence soaking or reducing aggregate demand." I'd bet there have been long periods of recession which have little to do with the federal budget. When the economy finally slows down after this cycle, maybe it will be because of events outside of the U.S. For instance, SEA exports it's way back to health, and our trade deficit continues to balloon. How exactly is this huge trade deficit financed--where is all the money coming from? I think I understand your liquidity argument though, it is the main argument put forth over on the Kahuna thread--consumers eventually are tapped out, business borrowing eventually tops out, and the whole machine just winds down. Finally, in these discussions, you always hear the jargon "aggregate", Zeev used it in the passage I quoted. What is that? Sorry, guess I should have taken an econ class back in school.