Trindy, first of all, it is no surprise that the decline in these indicators has been comparatively small when one considers that we have just experienced the biggest quarterly expansion in the broad money supply ever. in fact, the surprise should be that we have seen these declines in SPITE of that.
note, comparing this downturn to other post WW2 recessions may not be useful. it differs in many respects, chiefly insofar as it is NOT the usual "demand eclipsing supply-leading to inflation-leading to rate hikes-leading to recession-leading to rate cuts-leading to recovery" cycle.
neither inflation, nor supply constraints made an appearance. on the contrary, the economy suffers from vast industrial overcapacities, not to mention an egregious credit bubble.
as to what it is that so spooks Greenspan, it is the very credit bubble alluded to above. leverage in the system is so endemic that the Fed is forced to limp from one crisis aversion ad-hocism to the next. the rate cuts have, contrary to the official statements ,neither anything to do with the Fed's views on inflation, nor the economy per se. they are a reaction to a developing post bubble liquidity and solvency crisis. |
