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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: cardcounter who wrote (30890)	8/11/1998 10:25:00 AM
From: Mike M2	Read Replies (2) \| Respond to of 132070

Cardcounter, Irving Fisher was a Yale professor and one of the most respected economists of his day yet he failed to see the dangers of financial asset inflation like many contemporary economists. I'm sure you heard his quote about stocks having reached a permanent plateau just days before the crash. The only economists I know of who saw the collapse in SEA coming were of the Austrian school. I was too tired to read the Yalie's comments but there are many very educated men who have it wrong in my(humble-g-) opinion. Any boom created by the inflationary expansion of money and credit ends in a deflationary bust. Look at Japan and SEA or the U.S. mkt in the 20's. Mike

To: cardcounter who wrote (30890)	8/12/1998 1:44:00 AM
From: Earlie	Respond to of 132070

Card Counter: My sincere apologies if my post suggested an affront to the author of the quoted article. It was unintentional. It did bother me that the author's comments (dated in May) appeared to reflect no concern or knowledge of an ongoing "bank run" (that began in April), a central bank nightmare in any jurisdiction. It may be that we are debating different points. My concern relates to the impact on our markets IF this new flow of funds IS curtailed. While a curtailment may not be affected, the BOJ must respond to this fearsome "bank run" if any banks at all are to be saved. While we all might hope or believe that this flow of funds will continue, (and it certainly serves our bond and stock markets and interest rates well), its continuance is a disaster for the Japanese banking system, currency and economy, at least from their perspective. I have to disagree with your suggestion that the current treasury yield implies an insignificant repatriation of treasuries. Yield relates to supply/demand as it exists from all sources, and one has to wonder why Great Britain has suddenly become so enchanted with U.S. treasuries (the new large owner on the block) or the degree to which the big increase in the U.S. money supply occurred to soak up the excess. Certainly the long term rising trend in foreign buying has been broken and is now heading south. This is a simple fact and to me a worrisome fact . Mind you, I worry easily (g) Both you and Mr. Derosa make a point that isn't important to my perspective on the topic, but may be to others, which is that so far, Japanese BOJ selling of treasuries has not created visible distress in the treasury market. (If it had, we wouldn't be having a friendly discussion, because events would have long since moved our mutual interests to self preservation). It can and is argued that so long as some group or entity buys them from offshore, them Rubin and Greenspan are doing their jobs well. My concern relates to three things. The trend reversal (foreign central bank buying is now selling), the cause of the selling (a "bank run" in Japan), and the implications if the selling increases (the Euro). I agree that the buying/selling is circular, but the very existance of such a nutty state of affairs speaks to equally nutty circumstances. A last concern if I might. Everybody agrees that the "flight to quality" or "safe haven" perspective drives these newly arriving foreign funds, and nobody disputes the benefits to our markets that they bring. The ugly fact remains that massive wealth has been destroyed offshore and that not a great deal of wealth remains available to be rescued or sent off to "safer" shores. If/when these rather transient new funds ebb or are cut off, our markets might respond as might an addict . Your last few paragraphs also delineate an area where I suspect we can agree to disagree. I'll cheerfully own up to being in the camp that expects the U.S. dollar to come under pressure (initially vis-a-vis the Euro, perhaps against gold) once the "flight-to-quality" dough is absorbed. I'll also cheerfully own up to the fact that at least a dozen viable counter arguments conflict in this aging noggin on the topic, so there is no strong conviction that I've "got it right" (a balance of probabilities stance at the moment, so this one is high on my "examine it thoroughly" list) The appearance of a second reserve currency provides a choice. The choice may prove to be no choice at all, particularly given the size of the global treasury issue, which appears as unlikely to be repaid as is any of the other major sovereign debts currently plaguing the world. This type of discussion is extremely worthwhile as it gets the neurons exercised. I'm delighted that you have joined this post and that you contribute on this obtuse topic. No doubt this market will make fools of us all, but less so if we can gain better understandings through good discussions. Best, Earlie