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Politics : Idea Of The Day
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To: IQBAL LATIF who wrote (30758)2/25/2000 11:08:00 AM
From: sandeep  Read Replies (1) of 50167
 
Iqbal, Thanks for the explanation.

However, the market is not reacting to Greenspan the way it should. Shouldn't this change his thinking ? Every day some Fed governor or another says something strange.

Yesterday, Poole (St. Louis) said tight monetary policy that keeps inflation under wraps will keep interest rates lower in the long run, and he dismissed the the notion that higher interest rates depress economic activity.

I hear that one of the Fed's preoccupations these days is that a tremendous run-up in stock prices in the past few years has created a ``wealth effect' where consumers spend more as their paper wealth grows. The DOW is up 9% over the last 2 years. A/D is at all time low. That doesn't look like wealth effect to me. Sure, NAZ is up very big. But, some of these companies are in areas we cannot do without in the future. Higher interest rates will not affect the wealth effect to a material degree for them.
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