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Strategies & Market Trends : ahhaha's ahs
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To: ahhaha who wrote (664)12/21/2000 10:50:43 PM
From: FR1Read Replies (1) of 24758
 
I claim the stock market and economy will now be subject to the good old 4 year business cycle..

I agree with your comments on the FED but I don't think it will be a 4 year cycle. It will be more compressed.

I once looked up old comments made by AG and found that when unemployment hit 5% he was a little disturbed. When it hit 4.5% he flat out stated that the rate was unsustainable and action had to be taken.

If it were not for the Russian collapse the FED would have gone on a rate increase rampage at that time. The FED decided that the Russian problem created more risk than low unemployment so they lowered rates even though they knew it would cause lower unemployment and guaranteed inflation.

Surprise! unemployment went below 4% and no inflation. Perhaps we could go down much further - but the FED doesn't believe it. They demand to see unemployment go up. They know they will get it in January, with all the promised job cuts, so they will lower rates then.

Unfortuantely, this won't last long. The economy will be back below 4% in a year or so and the FED will start the next round.

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Something I have never understood:

1) The FED claims they are only fighting inflation.

2) They say that if we do have inflation they will have to raise interest rates and hurt the economy.

3) Therefore, even though there is no inflation, they must raise rates because inflation might come sometime and force them them to raise rates.

It's like the fireman that sets a house on fire because he has a hunch that it might catch on fire someday.

Philosophers have a name for this kind of logic but I can't put my finger on it.
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