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

To: Mike M2 who wrote (59328)	5/14/1999 10:13:00 AM
From: valueminded	Read Replies (1) \| Respond to of 132070

William You have said this before, but my understanding is that private debts (as long as they are fixed rate) can be inflated away as well. So your 6.5% fixed rate mortage gets inflated away, if inflation is at 8% and cola are then pegged to the 8% rate. imo

To: Mike M2 who wrote (59328)	5/14/1999 10:35:00 AM
From: valueminded	Read Replies (1) \| Respond to of 132070

William: I think one thing that is ignored in the analogy you give about Japan recently and US in the 20's is you are comparing creditor nations to a net debtor nation. US in the 20's, Japan are net creditor nations, the US is currently a net deficit (and rather large one at that) nation. Typically, a huge deficit is not conducive to a strong currency - so the only thing maintaining capital inflows is the interest rate differential. Given that, as either the rest of the world recovers, or the US goes into recession, we will not have any latitude to lower rates - and if we do lower, the decreased desirablility of holding dollars and decreased valuation relative to other currencies will spark inflation. I believe this is what AG will do (past history speaks of it) since he will be most concerned with our economy and not the effect of devaluing the dollar to the foreign holders of our debt. Once this policy becomes obvious, look for a huge spike in interest rates and inflation as entities try to unload our debt into a market unwilling to buy it. I agree that in the end we will end up with lower rates as the economy tanks and the underlying debt is written off. But first, look for higher and higher rates. (Imo)