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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Zeev Hed who wrote (4620)11/10/2001 10:59:57 PM
From: Fiscally Conservative  Read Replies (1) of 99280
 
Zeev

With regard to your reply to,s.berg,you wrote:

"If the economy rebounds (and thus deficits once more contract or stabilize) sharply by the second or third quarter, they may be able to move and soak back some excess liquidity by late next summer (giving us a memorable October Massacre in 2002? Just before congressional election? They did it before....), if the bounce is slower, the next bull will probably "live" through at least the end of January 2003. What could change this outlook? If despite the stimulus, the economy does not rebound at all and we find ourselves still marred in a recession by next summer."

What would be the likely outcome if the economy does not rebound at all and we do find ourselves marred in a recession by next summer? Explicitly,would the FED still be in the position of having to raise rates to take back the excess liquidity? How long can the FED allow the vulnerability of excess liquidity too remain in a non-responding economic cycle? Is there a time table here from which Greenspan follows or is history our only guidance?
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