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Pastimes : Ask Mohan about the Market
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To: Mike M2 who wrote (17137)11/24/1998 6:41:00 PM
From: Crimson Ghost  Read Replies (1) of 18056
 
Bill: Consumer debt certainly is a problem. But I think the real biggee is the stock bubble itself. I wonder how many people are taking second mortgages and borrowing on their credit cards to play the market.

AG and the boys have a tiger by the tail. If they move to deflate the bubble a serious recession is virtually certain. But the longer they let it go on, the bigger the ultimate bust.

Important to remember that the Fed moved to prick the bubble in the late 1920s. As did Japan in the late 1980s. But so far the Fed seems devoted to perpetuating our current bubble as long as possible.

With real interest quite high they were entirely justified in cutting rates recently. But a responsible Fed would have accompanied these cuts with hikes or threatened hikes in margin requirements to limit speculative fever.
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