PRESIDENT GEORGE W. BUSH Message Board

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Politics : PRESIDENT GEORGE W. BUSH

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To: DuckTapeSunroof who wrote (756279)	12/20/2006 9:25:57 AM
From: Rarebird	Read Replies (1) of 769670

>>The FED funds rate affects many consumer credit vehicles, including credit cards.<< The Fed has virtually no tools to prick an asset bubble because their blunt instruments (interest rates) affect all players in the economy and punishing everyone with higher interest rates in order to prick an asset bubble in a single sector of the economy is not fair. Actually, the markets are reacting more rationally (these days) than many in the past did. They have learned that the monetary authorities are ready and willing to come to the aid of stability in the face of threats to the economic system. Checks and balances in the form of risk-sharing make the current system more resilient. I agree with the Permabears that the US has a fundamentally overvalued stock market and a bond market which reflects a ridiculously low yield level for the inflation risk inherent in loaning money for a decade or more. But Nothing in the fundamentals requires this situation to be reversed immediately. The market will rudely take steps to destroy any premature bear who stubbornly dares to stand in its way.

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