www.gold-eagle.com: "What Will Cause The Stocks To Crash?" (full edition)

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Part One of this editorial, which I posted a link to last week:

Part I

Part Two is now available:

Part II

-- Jack (jsprat@eld.net), July 01, 1999


Fascism, what it is and how to fight it- Leon Trotsky 1930-1932

-- I Ain't no Senator's son (It's@not.me), July 01, 1999.

I do not believe this guy's stats in re zero coupon bond returns versus the stock market. That's neither here nor there, however, as the market is not going to hold--sadly.

Does anyone know how devaluation of money works? Thanks.

-- Mara Wayne (MaraWAyne@aol.com), July 01, 1999.

I Ain't no Senator's son,

Thanks for the link. I backed up on the adress and found I was in a huge database. What is CMU?


-- R. Wright (blaklodg@hotmail.com), July 02, 1999.

For Mara Wayne - valuation of money

From my limited knowledge...

When investors have high hopes for a foreign economy, they will invest lots of money there and buy increasing amounts of that country's assets. When political and domestic upheavals occur, rumors may start surfacing that the economy is in trouble. The foreign investors will stop investing and the residents will try to get their money out of the country. (Asia) When they do, the value of that currency drops. When a country is in trouble, the demand for goods and assets falls. People want to sell because they expect the price to fall, and they no longer view this country as a good investment.

The US uses monetary AND fiscal policy to influence the economy through changes in the banking system's reserves that in turn will influence the money supply and credit available to the economy.

In other countries, the institutional arrangements are slightly different. The central bank is part of the gov't, so both monetary and fiscal policy are controlled directly by the gov't.

In both cases, the amount of reserves in either system will directly affect interest rates. As the reserves are increased, the interest rate will increase demand for that country's currency, and push up the exchange rate. The currency will cost more in comparison to the currency of other countries.

Many factors to consider - banks reluctant to lend makes it difficult for manufacturer's and exporters to transact business; banks reluctant to lend money because they would have to dip into their reserves to do so; a low exchange rate (devalued currency) raises the price of imports (Taiwan); a decrease in consumer spending creates a trade surplus (Japan); devaluation also occurs when a gov't faces heavy payments on its currency (debt) as in Russia's case.

So while one thing could cause the $ to be devalued, it is usually because of a cascading effect of other things. Did this help?

-- Joan of Arc (jlinn35323@aol.com), July 02, 1999.

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