You make three clear points:
1) Rate cut: You may be right about the unwisdom of attempting to manage a recession in hope of political gains down the line. If the "virtuous circle" is allowed to get too vicious, recovery from it may not come on some preferred schedule. If a recession comes hard and fast, Federal budget projections may also start becoming subject to revision, hitting potential flexibility either for a "mega"-tax cut or for social security part-privatization from the opposite direction. Unfortunately, the other kind of tax cut, and the one that might both make the most sense and help the market as well - capital gains - is the one that Bush failed to run on. All this said, the readiness of the Fed to act now remains doubtful: No one who claims to have a good line on the situation seems to be predicting more than a shift in bias next week. To me, the idea that Bush is in any position to apply significant pressure one way or the other seems even more doubtful.
2) Cash for a rally: Could you give a little more flesh to your "$4 trillion in losses" figure? What does the number precisely take into account? What does it leave out?
3) Long-term stagnation: Here, I think you may be overreaching: You state: "The home PC changed the world as we know it, and there are no more technology inventions on the horizon that will change the landscape of this world like the PC revolution." Now, how could you know that? How many people predicted the PC revolution prior to its occurrence?
There are arguably several well-known and fairly well-developed and -applied areas of R&D (from fuel cells to biotech to bluetooth or some evolved form of it, just to name three) that have the potential to "change the landscape of this world," and there are others that are less well-known or well-hyped, though how long it might take any of them to do so, either independently or synergistically with other advances, is inherently unpredictable. Likewise unpredictable is the extent to which any of them might alter the macroneconomic picture, or, to introduce yet another variable, how much even desirable alterations in the macroeconomic picture will affect the stock market. It's been argued, for instance, that, though high growth may be the natural condition for the U.S. economy, higher growth in stock prices may not be.
Who knows? Over the years, I think we've all seen many seemingly persuasive scenarios for the future turn out to be virtually meaningless where not completely misleading. |
