Interest rate rise will trigger market crash / correction Message Board

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Strategies & Market Trends : Interest rate rise will trigger market crash / correction

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To: Peter R Smith who wrote ()	2/15/1997 7:09:00 AM
From: Arthur Tang	of 52

Thank you, Peter Only if FED'S overnight discount rate goes up, will any crash happen. As you know, liquidity control, by FED'S auction, does far finer (smaller effect) job to tighten than interest rate change. Bank reserve change can also tighten or loosen liquidity; expand or contract in monetary policy. All businesses will lose money if interest rate goes up. FED can not do and will not do, the foolish thing that Volker did years ago. Right now we are in nifty fifty(1950s economical model almost zero change in interest rate--overnight discount--). In 1993, overnight discount rate was down to 3% and was painfully readjusted to 5+% in 1994. Since then, fine tuned to today's rate. So, we know that low interest rate does not provide incentive to save for investment on growth of economy. Now look at the investment attraction, every one is saving for the future. (401k helped). High interest rate in 1970s; taught us a lesson that we can never let people try adjusting interest rates again. In the mean time, corporate efficiency is achieved because of automation by computer improvements. Productivity is way above labor rate change due to job change. Better business management is the reason for better earnings. Inflation is controlled by slightly more supply than demand. Whoever is working on this grand plan should be praised.

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