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Strategies & Market Trends : Waiting for the big Kahuna
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To: James F. Hopkins who wrote (20964)6/25/1998 1:31:00 PM
From: P.T.Burnem  Read Replies (1) of 94695
 
To all: Fed Fears Stock Market May Crater if Rates Rise.

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CHATHAM, Mass., June 25 (Reuters) -- Fear of a sharp decline in U.S. stock prices plus lingering Asian weakness are keeping the Federal Reserve from raising interest rates, said Paul Samuelson, a Nobel-Prize winner in economics.

''There are two inhibitions at the Fed: Asia and Wall Street's quasi-bubble. They are afraid they are going to send the stock market down 30 percent if they tighten,'' Samuelson told Reuters in an interview.

The Dow Jones industrials soared anew on Thursday, vaulting the 9000 level for the first time in two weeks.

Samuelson, professor emeritus at Massachusetts Institute of Technology (MIT) and an adviser to Boston Fed President Cathy Minehan, spoke to Reuters at the Federal Reserve Bank of Boston's conference on business cycles. He had delivered the opening comments on Wednesday.
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Note that the Fed's concerns are similar to those of BOJ's in the late '80's: a bubbling stock market and a weak US economy. The funny thing is that the Fed realizes what's coming, yet is unable to summon enough political courage to tighten.

PTB
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