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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: pater tenebrarum who wrote (52504)	12/30/2000 9:15:01 PM
From: yard_man	Read Replies (1) of 436258

Interested in your take on a couple of items here (I'm not that savvy as to what the Fed is trying to do as you can tell): gold-eagle.com obviously the idea of pointing to stock prices and tryinig to discern future strength or weakness in the economy is fallacious (except perhaps in the case of a market crash)-- but what about his point regarding what the Fed does -- i.e. targeting short-term rates and the increased liquidity that has been necessary to do that over the last few months => demand for money is high => short term rates would be higher still if the Fed didn't take this approach? No doubt, he is correct that the Fed has kept rates artificially low for a long period -- but in general, what is the effect on longer rates when the Fed targets these short-term rates ... What argument do they use to target the FFR and not some other rate (i.e. longer rates)? And what convinces them that they know what that rate should be (is it mostly GDP or what)? Seems to me their targetting of such short term rates is liken unto fine-tuning a nuclear reaction -- i.e. they are very likely to miss the big picture. Even if interest rates are the target, there has to be some larger goal -- not just overall "price stability," right?

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