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

To: Joss who wrote (31311)	8/21/1998 12:09:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Steve, It is hard to argue higher rates today, but here is my thesis: the valuation of the dollar is too high and we are printing too many greenbacks for it to hold. Right now, we are running enormous trade deficits, which do not cause inflation as long as the dollar rises in value. But when the dollar declines, all of those imports take a jump in price. The impact raises rates, and since we are way overleveraged, it kills the economy (when you are scraping to pay your variable mortgage and the rate goes from 7 pct. to 10 pct., you are in a world of hurt). So, you end up with higher prices and rates with negative or at least sluggish growth. In the 1970s, this was called Stagflation and it is not good for the stock or bond markets. MB