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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Greg Jung who wrote (1062)11/30/1998 3:18:00 PM
From: Robert Douglas  Read Replies (2) of 3536
 
We now have a Fed intervention larger than the Hong Kong and Japanese interventions.

You are trying to equate two things that are as different as apples and oranges. The Fed has not intervened in the stock market like the HKMA. The Fed's lowering of interest rates was designed to calm a jittery credit market and move preemptively to stimulate a slowing economy, mainly in manufacturing. To say that the intended effect was to cause a bubble in internet stocks is ridiculous. In fact it is ridiculous to say that bubble in this type of stocks was purely Fed-induced.

Would the Federal Reserve be justified in bursting this bubble in equities? Only if it poses a serious threat to the health of the U.S. economy. I hardly think we are approaching that. If the stock market continues to advance, unsupported by earnings increases, then the Fed might have to tighten to end the speculation. Until then, I think they have done exactly what they should have.

-Robert

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