[clue-talk] The stimulus bill

[Angelo Bertolli]

Dennis J Perkins wrote:
> I expect that all of this bailout money and economic stimulus will
> result in record inflation.  
>
> I remember the inflation rate of the late 70's and early 80's.  If I
> recall correctly, I paid 14% interest on my home in 1985, and the
> interest rate was variable because you couldn't get fixed rate. Luckily,
> I bought about the time the rates started to decline.
>
> I would not be surprised to see rates exceed that period.

Oh yes definitely.  That is the overall answer to this problem:  you 
have to inflate your way out (however you do it) or suffer a 
depression.  The TARP money already sets the precedent, and I'm sure 
we're going to use inflation.  Increasing the money supply in the 
economy and effectively distributing the burden "evenly" among everyone 
through inflation is the safer road.  At least politcally.

Our other option is to let the banks fail, which will cause a domino 
effect essentially bringing most of the markets down.  They estimate 
that the DOW will be in the 6000's if the banks are allowed to fail (or 
get nationalized).  Up until now, they could always claim that 
"historically" the stock market is where to invest your money.  If 
something serious happens, people won't trust the market again for quite 
a while.

I know I don't trust it anymore.  The portions of companies that I 
theoretically own don't really mean anything unless another person 
thinks they do as well.  It's not like I can just "dissolve" my part of 
the company and take my cash out.  I need a buyer.  The market will then 
be mostly a preferred share (debt) market, and bond market, with people 
not wanting to invest in common stock at least until they "forget" about 
this whole thing.

Angelo