VOLTAIRE'S PORCH-MODERATED Message Board

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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED

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To: Jill who wrote (32214)	3/2/2001 8:23:05 AM
From: edamo	Read Replies (1) of 65232

jill...."fed induced recessions" most view the fed in respect to equity pricing.....greed as stated by alan has naught to do with the real world havoc that rising interest rates creates. businesses be they big or small, use borrowing to finance receivables and inventories....some use it for payable discounts...with every rate increase, that amount reduces the profitability of business who are required to borrow...rates increase too much and inventories are cut to reduce costs, prices go up,payables slow as do receivables.......and eventually cost cutting measures in the form of overhead reductions are implemented..... in essence increasing rates can and usually do feed an inflation cycle......when has the economy ever boomed with high interest rates??? one must be blind to ignore the large scale layoffs that were caused by the fed rate increases...a tight job market that the fed gave as reason to increase then becomes very loose...... the cycle should not be artificially induced, better to let market dynamics dictate increase or decrease of money supply......greed not a factor in the real world of corporate business, solely profitability and cost of money ......tight money not conducive to expansion as return on investment is harder to achieve... real economy has been weak for quite a while, inspite of government statistics to the contrary....

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