05-03-2003 01:44									#1
	Stocks Slump; Car Makers, Housing Hit Support Apolyton, buy Galactic Civilizations: Deluxe Edition

Demand seems to be falling badly just as it seemed that business spending was starting to increase. Housing starts was the one bright spot and that looks bad too now.

http://story.news.yahoo.com/news?tm...rkets_stocks_dc

What should we do? Some economists are saying the Fed should lower interest rates. The FF rate is already 1.25%. Do we want to take the it down to zero like it is in Japan? They have been in a recession for about 10 years now and zero interest rate isn't helping. If our rates go down to zero will we be in as bad of trouble as Japan?

	05-03-2003 03:05									#2
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I've been telling you. Depression time

but seriously. The thing people forgot about the stock market. Is you can't believe the PR hype. A company is worth only as much as their profits. And many of these company's aren't making profits. And many of them lie about how much they are making.

In any case I recommend not investing in stocks and paying off your debts. And I predict real estate values will drop off quite a bit. that is your chance to buy in when it is cheap.

	05-03-2003 03:07									#3
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Lower the interest rates? That will help the unaffected only.
If you don't have unemployment, what does a lower rate gain?

The 2 biggest areas of concern in this country, that are legitimate.

What is now being called "Homeland Security", and Employment.

	05-03-2003 03:09									#4
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Good advice Dissident. If this war begins and ends soon though things might look up for a while.

	05-03-2003 03:15									#5
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yes good oil prices will help out the economy quite a bit.

but until this is over expect rough times for the economy. energy prices and gasoline prices will be too high.

	05-03-2003 05:49									#6
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quote: Originally posted by Dissident I've been telling you. Depression time but seriously. The thing people forgot about the stock market. Is you can't believe the PR hype. A company is worth only as much as their profits. And many of these company's aren't making profits. And many of them lie about how much they are making. In any case I recommend not investing in stocks and paying off your debts. And I predict real estate values will drop off quite a bit. that is your chance to buy in when it is cheap.

I think a lot of people think like you Dissident. People see a bit of a bubble in real estate. After all people have been selling their stocks and buying real estate. Housing starts have been good, but now they are falling off. There's bonds, but what if that market goes bad. Then where will people put their money. Maybe if they pay off enough debt they will start to spend more, but that takes a long time. Meanwhile there could be big problems in the future.

	05-03-2003 06:39									#7
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dont touch the rates
deficit spending is driving up interest rates
which means less investment
threat of war is making the consumer jittery
companies know this, and wont invest into things which wont sell

	05-03-2003 06:41									#8
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and btw in that quote, I hate to say this but Mr. Marx doesn't seem to know how the banks get their money, because hardly any of it is deposited by the evil capitalists

	05-03-2003 09:22									#9
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quote: Originally posted by Lawrence of Arabia deficit spending is driving up interest rates

Bond rates are going down though. And the tax cuts are going to the rich. My feeling is that they are going to turn around and buy bonds. I don't think these deficits will increase interest rates much.

	05-03-2003 09:24									#10
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quote: Originally posted by Lawrence of Arabia and btw in that quote, I hate to say this but Mr. Marx doesn't seem to know how the banks get their money, because hardly any of it is deposited by the evil capitalists

Where there is a lender there is a borrower. One of them is usually an evil capitalist.

	05-03-2003 09:25									#11
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no you see, by spending more then thheir budget, the us govnermnet needs to borrow money from the banks. which means that there is less money in there, and sincve interest rates are the price of monney, when money becomes more scare, its price increases

	05-03-2003 09:26									#12
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Dunkan - but the majority of the money that the lendor lends does not come off the backs of the working class. In the US, banks need to have 10% of their lendings backed up by cash. that means that out of 100 dollars that you borrow, only 10 of it came from the workers

this money is hardly dripping of blood.

	05-03-2003 09:30									#13
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quote: Originally posted by Lawrence of Arabia no you see, by spending more then thheir budget, the us govnermnet needs to borrow money from the banks. which means that there is less money in there, and sincve interest rates are the price of monney, when money becomes more scare, its price increases

The banks will sell the bonds to those who got the tax cuts.

	05-03-2003 09:32									#14
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and those bonds will in no way cover the deficit, because even if every dollar of the tax cut was invested into bonds, the US would still run a deficit for the next 3 years at least.

	05-03-2003 09:33									#15
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I've said it before and I'll say it again.

The day Saddam is DEAD, the entire world will begin to turn around.

	05-03-2003 09:34									#16
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quote: Originally posted by Lawrence of Arabia Dunkan - but the majority of the money that the lendor lends does not come off the backs of the working class. In the US, banks need to have 10% of their lendings backed up by cash. that means that out of 100 dollars that you borrow, only 10 of it came from the workers this money is hardly dripping of blood.

Actually it's 10% of their short term deposits. There is still a dollar deposit for every dollar out on loan.

	05-03-2003 09:36									#17
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quote: Originally posted by Lawrence of Arabia and those bonds will in no way cover the deficit, because even if every dollar of the tax cut was invested into bonds, the US would still run a deficit for the next 3 years at least.

LoA,

The deficit is financed by these bonds. That's how the government borrows the money to spend the deficit.

	05-03-2003 09:37									#18
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banks fail when everyone goes there to collect. this is because they only have 10% of the money to back up their loands

	05-03-2003 09:39									#19
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quote: Originally posted by Lawrence of Arabia banks fail when everyone goes there to collect. this is because they only have 10% of the money to back up their loands

Yes, I know that. I'm not talking about the required reserves. I'm talking about the deposits.

	05-03-2003 09:41									#20
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quote: Originally posted by Ted Striker I've said it before and I'll say it again. The day Saddam is DEAD, the entire world will begin to turn around.

It might be late by then. Things could get pretty ugly.

	05-03-2003 09:41									#21
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i dont understand what this has to do. the government borrows from private banks to cover t heir deficit.

	05-03-2003 12:57									#22
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Ugh! Poly went down again.

LoA,

After the Treasury bond auction, the dollars can be put back in the banks from the savings from the tax cuts. In that case interest rates wouldn't go up too much. Either that or the people who recieve the tax cuts will buy bonds and the result will be similar.

On the other hand, if the people who recieve tax cuts niether make bank deposits or buy treasury bonds interest rates will go up. But I think that there is a good chance that rates won't go up much.

	05-03-2003 20:18									#24
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Nice graph. I think i is right about at that point right now too.

	06-03-2003 05:13									#25
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T bonds go into the Fed. People dont borrow from the Fed they borrow from private banks.

so the government borrowing from the private banks increases, and with decreased interest rates, people borrow more. as a result, there is less money in the banking system and the price of money at those individual banks goes up. the interest rates increase.

	06-03-2003 05:35									#26
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Larry - not quite right there. The Fed controls the liquidity in the banking system. The Treasury borrows through issuing debt (Bills, Notes and Bonds) to a wide variety of investors. Those two are not really related, though the Fed can change their holdings in Treasury isssues to change liquidity.

Interestingly, deficits usually result, at least initially, in lower interest rates, but only because low rates are caused by a lack in general demand for debt that accompanies economic slowdowns and therefore also lower tax receipts.


The lower housing sales figure that Dunk referenced in the first post was for New Homes. Existing Homes sales had a strong result for the same time period. Existing Home sales account for about 7/8ths of Home sales - so don't necessarily read too much into it yet.