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Politics : Ask Michael Burke
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To: valueminded who wrote (70413)11/11/1999 9:15:00 PM
From: Earlie  Read Replies (2) of 132070
 
Chris:

Depending on the severity of a serious market collapse, you may be correct. If it is a massive fall, Greenspan would not stand around with his hands in his pockets. On the other hand, it is well known and well documented that the Fed thinks the markets are over-valued by as much as 50%, hence Greenspan would not likely be inclined to act quickly in the initial stages of a major market correction. Margin calls could do much damage before any action of the Fed could have significant impact.

One more thought; Keep in mind that this last decade has witnessed unprecedented loose money. As such a period is extended, the impact of an extension or expansion of same tends to run into the law of diminishing returns. In essence, it requires ever greater gobs of it to maintain the scene. Obviously it can't go on forever.

Personally, I suspect that expanding treasury selling is the most worrisome item on the Fed's discussion agenda at the moment. In the absence of a catastrophe, U.S.rates must rise.

Best, Earlie
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