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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Robert Douglas who wrote (3088)5/10/2001 12:32:07 PM
From: Hawkmoon  Read Replies (1) of 3536
 
First, the Fed Funds has barely reached the level where it can be considered stimulative. In fact, it's possible that we are still at a neutral level and won't be at a stimulative level until we drop below 4%.

I agree. But the question is whether the Fed will lower by .50 points this month, or .25.

Given the lag inherent in monetary policy, it is only then that the clock will begin ticking on when the recovery will begin. A really aggressive level wouldn't be reached until the Fed Funds rate is below the rate of inflation.

Actually, I think that the Fed is realizing that with the increasing liquid financial system, as well as just-in-time economic efficiencies, stimulus could show a faster reaction. Just as the Fed hikes have effectively shut the economy down in December/January.

But I agree... this is not over, and corporate profits in certain sectors could continue to suffer.

The Fed must act more assertively so that business will recognize that they now have the best terms (interest wise) that they can expect. Then they will no longer postpone projects or capital investment in the expectation of decreasing overhead costs.

But fortunately, we have the ability to stimulate far more effectively than other nations due to our still present fiscal surpluses. That's money that can be pumped into the economy (where it belongs), rather than be p*ssed away by politicians on the appropriations committees.

Hawk
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