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Strategies & Market Trends : Classic TA Workplace
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To: Les H who wrote (8335)7/30/2001 3:51:31 PM
From: Perspective  Read Replies (1) of 209892
 
Another reason why Fed ease has fixed things so many times this century: the Fed is usually the problem. In fact, it's SUPPOSED to be the problem; that's its job, to lay on the brakes when markets begin to destabilize. Unfortunately, the Fed only seems to fight inflation, when deflation is an even more serious problem. Price stability on all goods should be the goal of the Fed.

When tight money is the cause of the downturn, Fed ease fixes it. However, there have been two instances in the past century that tight money was not the cause of the recession: the 1930s, and now. In both cases, the Fed was lowering short-term rates as much as it could without tanking the bond markets. The cause of the downturn was an investment mania and excessive capital investment, leading to deflation. Fed ease can't fix that.

BC
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