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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (2744)	12/27/2000 12:47:14 PM
From: Robert Douglas	Read Replies (3) \| Respond to of 3536

Thus, the only way to prevent the economy skidding into the barrow pit is to release the financial breaks and reduce by 1/2 point as a form of shock treatment that turn consumer psychology around. My feeling is that in "normal" circumstances the US economy would be in fine shape. Demand isn't really too much out of line. We need to bring consumer spending back down to the trend line and we need to pare back inventories and capital spending a bit. But all of these are natural cyclical swings, nothing to worry about. What should happen is for the dollar to fall and recoup some of the demand that is being bled off by means of that large negative net export number. This natural stabilizer would right the ship and we would return to growth. But the problem is that the rest of the world has come to depend on this demand from America. If the improvement in net exports has the effect of pulling the rug out from the rest of the world, then US net exports won't improve and the US and the world will hold hands as we go into recession. Hence my question: Who will make up for the lost demand? My own feeling is that once US interest rates are lowered, the rest of the world will follow. Worldwide rates won't be needed to protect foreign currencies from a high dollar. This interest rate decrease will ignite demand worldwide and allow the US to go through our "growth pause" without inflicting damage to the world economy. But my benign scenario requires a healthy Europe and Asia, something that seems to be questioned regularly on this thread. If both of these regions are economically sick, then I see no other course but worldwide recession.

To: Hawkmoon who wrote (2744)	12/28/2000 8:43:13 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 3536

Ron, I really think all the people that think the feds are going to cut rate before the FOMC in late January are setting themselves up for disappointment. The evidence is not there that a rate cut is necessary, labor markets are still tight (the last report on new claims was actually a sizeable reduction, not an increase), unemployment will have to reach politically dangerous level (it used to be above 5% now probably 4.5%, but we are still only .1% above the nadir), forecasted growth will have to be under 2% (it is still in the 3% range). Just because the market got used to QOQ or YOY increases in profits in the double digit rate, a decrease of that increase to just 5% or even to no growth for a quarter is not a calamity that justifies reigniting the bubble we have all paid so dearly to deflate. I personally do not think that we get a rate cut before the March FOMC meeting, short, of course of a financial accident here or abroad. Zeev