Stockman Scott's Political Debate Porch Message Board

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Politics : Stockman Scott's Political Debate Porch

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To: Wharf Rat who wrote (21201)	6/28/2003 12:54:11 PM
From: Jim Willie CB	Read Replies (6) of 89467

my takeaway on Roach essay latest... Interestingly enough, the optimists on the economy, including those at the Federal Reserve, cite improved financial conditions -- not just rebounding equities but also reduced credit spreads -- as a key driver of the coming revival in the US economy. Yet, if I’m even close to being right on the economy, the markets could well be blindsided by the next in a long string of relapses. To me this is a painful replay of one of the great sins of the late 1990s. Framing a macro view of the real economy on the basis of an overly optimistic prognosis by financial markets could end up being the ultimate in circular thinking. In its inflation fighting days, financial markets learned never to doubt the Fed. In its deflation-fighting role, markets are giving the Fed the same benefit of the doubt. My biggest fear is that the Fed’s skill-set is asymmetrical -- that the central bank is much better in fighting inflation than deflation. If I’m right, that could spell a tough reality check for the US economy and for ever-optimistic financial markets.

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