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To: Robert Douglas who wrote (2993)	2/9/2001 5:28:54 PM
From: Yorikke	Respond to of 3536

I didn't intend to imply that I thought the Fed was accommodative given its easing. I believe its very necessary. However AG is likely to be considering the inflation number, and the future possibilities of increased pressure on/of inflation. He has a history of making both Government and Business jump through the inflation hoop that he holds. That aside I believe they may do another .50 next meeting, maybe even more. AG is not averse to moving in steps greater than 1/4,. and the fed has a record of doing so at times. I think we may see the 'true' interest rate at zero in the not to distant future. But I believe AG sits there listening to the similar arguments you have posed and accepts them; but says something like. 'I have a relatively distinct uneasiness about being perceived as moving to fast, and, though it is certainly not our intent, of initiating the very resurgence of exuberance we have so long sought to give subtle disinclination to and thereby bringing about, or at least leading to an expansion of demand that may fuel, albeit over many quarters, those inflationary tendencies that have an extended, in a timely sense, impact on the long term bond rates; hence pushing in a direction we have not been leaning. .

To: Robert Douglas who wrote (2993)	2/10/2001 7:27:54 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 3536

Douglas, I think that the danger of an immediate cut to what you think might be an appropriate non restrictive rate will reduce the psychological power of these rate cuts. If the rates were cut at once and the economy somehow refused to increase borrowing (Consumers and corporations), the fed would be pushing on a string with little left six months hence. Furthermore, I think that AG is fearful of a financial "accident" that might require real fast loosening on its own, and if the rates are already "rational" he may have to go too low. By giving the market a clear signal of its intentions to be accommodative, but not actually be, he leaves sufficient room for additional "psychological" boosts in the future. You got to remember that his main concern right now is not the actual volume of GDP, but preventing loss of consumer confidence that would impact GDP much further than necessary to absorb excess inventories. Spread the cuts over time, and the anticipation of these cuts, should reverse the direction of consumer and industry's confidence. As they say, it is a "con" game (g). Zeev

To: Robert Douglas who wrote (2993)	2/10/2001 8:02:37 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 3536

Actually, imo, I think the actual rate cuts are less important physically than an increase in liquidity to the money supply. AG combine some steep rate hikes with some pretty hefty draining of liquidity after the Y2K innoculations the Fed undertook. He went from losts of liquidity, to almost no liquidity, and now we're back to lots of liquidity. The rate cuts are important, but they follow the markets overall, which are dictated by the availability of money supply. Someone kick me if I'm wrong on this perspective... :0) Regards, Ron