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Politics : Ask Michael Burke

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To: Knighty Tin who wrote (61645)	6/8/1999 8:57:00 AM
From: DJessen33	Read Replies (1) of 132070

First the US economy did well and stocks went up. (So stocks go up if the US economy is expanding). Then stocks went even higher because of the developing World economy, the Asian miracle. (So our economy is dependent on the world economy) But it was found that the Asian miracle was really the Asian mirage. World economy falls. World economy could effect US economy so Fed moves and interest rates go down, so US stocks go up. (So we are not affected by the world economy) (So stocks go up as bond yields go down.) As stocks go up, the wealth effect encourages consumer, he spends more. US economy expands with this increased spending so stocks go higher. Wealth effect further encourages consumer so he spends even more. Fed worries about inflation because of all the spending so starts threatening to increase rates to get consumer to cut back off on spending and slow the economy and interest rates go up. Stocks go up (So stocks are not affected by interest rates or attempts to slow the economy) (So stocks go up because US economy is contracting.) Conclusion: We have come full circle. Therefore, all news is good news. DJessen33

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