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Non-Tech : Invest / LTD -- Ignore unavailable to you. Want to Upgrade?

To: Dipsey who wrote (4892)	10/31/1998 8:33:00 AM
From: Alias Shrugged	Read Replies (1) \| Respond to of 14427

These are interesting times. The long term, overall health and effectiveness of the economic system should be judged not only (or perhaps least) by the amount of wealth it creates, but also by its ability to purge the excesses, by its ability to let dumb or speculative investments wither and die. Actions must have consequences, and when someone attempts to negate the natural consequences, at best the fallout is postponed; at worst, the system is weakened and damaged. Japan is the poster-boy for what happens when someone tries to control the consequences. We now have the whole frikking world trying to smooth out that nasty old "boom and bust" cycle, as if the cycle is somehow unnatural. We see this all the time with small businesses. Many are created and many fail. No one is crying to have all businesses propped up. This cycle, the numbers are so huge, the leverage is so humongous, that policy-makers are concerned the whole thing will slide into the abyss. So, instead of allowing one or a few of the mountain climbers to fall, we are all going to strap ourselves together into one gigantic clump and ... The more the policy makers attempt to control things and create this new-world finacial arcitecture BS, the more Japan represents our future. Their financial system is choking to death on bad loans, bad investments. The stock market is not a prime mover of the financial problems. It will react to and later augment these forces. Like all past cycles, investments made at the top of the cycle are the worst. Due to incredible greed and leverage, we have made lots of dumb investments which eventually will be written off. What will negate this view? Quite simply, the past investments made must start panning out. Loans must be repaid (without benefit of new loans to pay the interest - so forget the Mexico model). Infrastructure investments must start producing a return. In other words, the only way we do not go down is if we really were not at the top of the cycle. So, will Russia repay? Brazil? Will all those chip plants and car factories start producing a return. Will all the junk bonds be repaid (Boston Chicken, where are you?). Seems this depends quite a bit on the consumers of the world (most especially USA folks) continuing if not increasing their coinsumption. That seems unlikely to me. We have effectively wiped out many consumers. Japanese have hunkered down; others don't have a choice - Indonesia, Thailand, etc. So, we go down. Apparently, the thought of falling off the cliff was unappealling. So, the powers to be opted for the agonizingly slow and painful "death spiral special". Coming to a theater near you. Mike