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To: Oak Tree who wrote (15008)	7/29/1998 10:25:00 PM
From: PaulM	Respond to of 116759

"I don't see a lot of bad debt" Thanks for your thoughts. I do see a lot of debt. Whether or not its of the bad variety is something we'll find out at a different point in the economic cycle. With respect to consumers, there's already a substantial amount of bad debt, with credit card bankruptcies hitting record highs each year. And this during an expansion. With respect to the fed government, 5.5 trillion is a lot of debt. This debt won't be paid back--not in 1998 dollars anway--as it must grow at the rate of the return on govt bonds, or 5% annually (generally faster than the economy). This debt will prove to be of the bad variety unless: (1) the percentage of economic growth which is taxed increases suffciently (this is already happening to an extent), (2) benefits are cut dramatically and/or (3) the govt sells its debt to the federal reserve which finances the purchase through money creation. Corporations may be in better shape. I don't know.