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

To: Freedom Fighter who wrote (60395)	5/23/1999 12:58:00 PM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Wayne, actually your problem may be you know too much. buy and hold for the long term is all you need to know in this market. Now the trick is how to keep it. One critical factor in the bubble is the inflation of money and credit -stock prices tend to rise in step with monetary inflation in the long run. As I have noted before the credit inflation goes beyond the monetary aggregates due to the unprecedented scope of nonbank credit especially asset backed securities. Another important point is the Federal Reserve can expand the ability of the banking system to makes loans but the loans must be in demand . In the 30's we saw pushing a string behaviour. Why would anyone want to borrow money in the 30s to add capacity? somewhere in my readings I learned that the banking system in the 30s had sufficient reserves to create twice as many loans but there was insufficient demand. There comes a point where private debt becomes so overextended that a retrenchment is necessary then we have deflation - a contraction of credit. During the 20s there was great confidence in the federal reserves ability to prevent a slump -just like now unfortunately I expect there attempts to reflate will fail just like the US in the 30s and Japan in the 90s. Mike