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To: Zardoz who wrote (15172)	8/2/1998 7:07:00 PM
From: JG	Respond to of 116780

Hutch, Foreign $ now going into US stocks, not bonds. Even if yen gets higher Nikkei could move up (see Europe). Therefore, asian $ could go into Nikkei; not US bonds. Also, if bond yields go up which is your premise for attracting foreign $, then bond investors lose $s. Again, if foreign $s flee US then dollar gets weaker and gold gets stronger. US stocks go down, bonds go down as yield goes up. I like your theory though and will watch. Jim

To: Zardoz who wrote (15172)	8/2/1998 7:09:00 PM
From: Ken Clayton	Respond to of 116780

But the increasing yields would have been a result of a lower bond price, created by lower flows into bonds, lower demand. The tide of the great overseas flood into bonds is turning, most of those who are going to buy bonds already have, the Big Bang notwithstanding. How will the US government respond to increasing deficits brought on by a slowing economy and rising interest payments? A recession would force the FED to want to lower rates, adding reserves to the system, clearly inflationary. In very simple terms, we have a deflation when there is not enough money in circulation to pay off existing debts. Inflation exists when money creation grows faster.In the extreme we have growing defaults in either scenario, just "liquidated" in a different manner.