Peter, Henry, Clark,
RE: a crash scenario
With the Fed now effectively tightening by not doing anything and allowing an inverted yield curve, and effectively forcing other countries--especially those heavily dependent on commodities and therefore getting slaughtered over the past few months--to raise their rates, suppose Greenspan suddenly changes course after the market "corrects" to, say 6400 or 6500, and lowers both the discount and the Fed Funds rates by half a point from here? Heck he has room to lower them a full point if he wanted to, presuming the CPI to be vaguely correct in gauging inflation. Wouldn't that almost immediately lessen the pressure on other countries as well to raise their rates to attract capital, and allow them to lower a little, allowing some rate relief internationally and perhaps stimulate some demand? Or am I being naively optimistic here?
I think he (Greenspan) is waiting to see the "whites in their eyes" before lowering, and he will aggressively lower when he does. By "whites in their eyes", I mean cries of fear and agony from a crash. He has a hero complex, IMO, and wants to come charging in on his white horse to save the day and to cement his reputation for posterity. Meanwhile, in my opinion, he is holding rates irresponsibly high right now.
P.S. Thanks all for the Kabul tales. |
