"Jim Stewart" <stewart@ceet.niu.edu> wrote in message
news:cob5jo$fcc$1@usenet.cso.niu.edu...
>
> "Nebulous" <Nebulous@pigtail.freeserve.co.uk> wrote in message
> news:41a8e4b3$0$19154$cc9e4d1f@news-text.dial.pipex.com...
> >
> > "MacHamish" <russj41@concentric.net> wrote in message
> > news:u4fhq0ddcl6djfvbqocv5a68fcj2obabs8@4ax.com...
> > > On Sat, 27 Nov 2004 17:30:36 -0000, "Nebulous"
> > > <Nebulous@pigtail.freeserve.co.uk> wrote:
> > > >Actually he should have bought Euro's.
>
> The fact that he did not places a shadow on his genusness. Hindsight is
> always easy.
>

It was intended as a joke Jim. If he got out of dollars and into gold he has
done very well, and much better than most people, although he has
contributed in his own small way to the demise of the dollar. I was trying
to suggest he should instead have done something (invest in Europe)  I felt
he would find difficult to justify to himself.
> > >
> > > Yes, when it indexed in the 80's vs. the 130's, but even at that, it
> > hasn't
> > > outperformed gold over roughly the same time frame.  I'd much rather
> > > speculate on gold than the vagaries of an individual currency.  It
> spreads
> > > the risk.  It's also easier.
>
> We have had three swings in gold in the past 40 years. In allcases, most
> investors
> do better in the market.
> > >
> > > >Either way each individuals flight from the dollar contributes to its
> > > >problems. America has to increase interest rates and tighten its
belt.
> > >
> At the cost of more jobs and an increase in the homeless.
>

Yes- as I've just said to MacHamish the free market is very unforgiving. If
it had been done a year ago it would not have hurt nearly so many people as
it is now likely too. Its either that or continue to watch the dollar slide.

>
> > > I agree, and it's unfortunate at this juncture in terms of the global
> > > economy.  We probably wouldn't be at this juncture were it not for the
> > > "international cummunity" refusing to see the real threat.  It's a
pity
> we
> > > aren't all on the same page where militant Islam is concerned.
> > >
> Militant Islam has been a threat for two decades. But it is not a
financual
> threat.
>
>
> > You're not at this juncture because of the international community.  You
> > have reached this point because your government has pumped massive
amounts
> > of liquidity into the market by reducing interest rates to prevent a
> > downturn. It did this just after the dotcom burst and then again later
on.
> > One of the impacts of this has been rises in house prices and people
> > remortgaging to buy consumer goods.
>
> House prices have risen consistantly for about 40 years. Remorgaging is
the
> results of our tax laws, not any effect of interest rates.
>
> Market liquidity is only affected on the short term by the feds. Lower
rates
> encourages borrowing. Someone will eat the horse that brought them here.

I'm not as familiar with the American data as the UK data,  but here the
average price of a home has swung around 3 times average earnings for many
years. It is now up to 5-6 times. We are likely to see a correction in
housing that could (although I don't really expect it to) see housing lose
50% of its value.  Our boom has largely been on the back of borrowed money,
both on credit cards and mortgages/remortgages. Incidentally one of the
worst phrases I know is "release the equity in your home." people aren't
releasing the equity in their home- they are taking on more debt and
gambling their home on being able to repay it.

Low interest rates encourage borrowing because people think they can afford
it. As rates rise they realise they can't. As banks realise people are
struggling they tighten credit. So consumers are hit by a double whammy-
interest rates on their current debts rise often much faster than the base
rates and they find no-one willing to let them borrow at rates they can
afford. I've been reading recently about credit card companies in America
raising rates significantly for people with big balances, so it may have
started already.

> >
> > Policy needed tightening at least a year ago to prevent a 'hard landing'
> but
> > that wasn't possible given the political situation. So rates stayed low
to
> > help until after the election and the hard landing now seems inevitable.
>
> Wouldn't help much, one way or the other. Hard landing is comming, like
> dotcom......
>
> >
> > Your arms budget and military commitments haven't helped the situation,
> but
> > it was there anyway without the recent jaunts.
>
> National debt. Becomes a problem as interest rates rise......
>

Yet they have to rise or people won't lend you more and you could default on
existing debt- bummer isn't it?

Neb