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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Lucretius who started this subject7/22/2002 1:49:06 PM
From: stan_hughes  Read Replies (4) of 436258
 
Amazing that this kind of stuff can come out of Goldman at the same time that AJC is still prattling about loading up on stocks-

(from a Goldman email)

The equity market's abysmal performance has kept financial conditions much tighter than is typical at this stage of the business cycle

The paradigm of thrift - tighter than usual financial conditions are weighing on private spending, prompting cutbacks, and further tightening

The longer the stock market carnage lasts, the more one might worry that the US is following in the footsteps of Japan from 10 years ago. US Financial conditions are currently at the same level as Japanese financials conditions in early 1992 (both measured relative to stock market peak).

With inflation already low, the risks facing monetary policy have become highly assymmetric: If inflation were to rise 2 or 3 points, the Fed could raise rates later to contain the problem; If inflation were to fall by an equal amount, monetary policy might become ineffective (See both: Japan, 1992 - 2002 and "pushing on a string", A C7 Biography)

Given those risks, GS does not expect the Fed to tighten for 12 months

The translation of the foregoing = which economic poison would you like to swallow, the double dip recession or the full-blown deflationary trap?
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