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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (69905)	2/22/2001 12:06:07 AM
From: Doug	Read Replies (1) \| Respond to of 99985

GST: A cut in interest rates does help boost near term consumption whilst increasing the threat of inflation due to increased money supply. During the last decade, interest rate cuts caused a massive spike in the money supply. Because of large gains in productivity any increased costs due to inflation were absorbed. Most Investors fail to understand that the productivity gains come from two sources viz Structural and Cyclical. The Techs certainly contributed to productivity gains. The biggest gains were in their own I.T sector . Outside that sector , I.T would like to claim that the productivity gains in the rest of the Economy is all I.T structural. However because of cheap money, a no of sectors went into overdrive mode resulting in full employment which contributed to cyclic based productivity. Now that the Economy has slowed we see that productivity has fallen which shows that the gains in productivity have a cyclic component which is not I.T related. A.G now has a very difficult task. he has to contend with limited productivity sponsored gains due to I.T , near full employment and overcapacity in the high Tech sector. I doubt cutting short term interest rates is going to do much for the Tech sector . If that was true, the High Tech industries of Japan should be booming. Every sector goes through a boom bust cycle of its own. There are no specific reasons why the Techs should not follow the trends of other sectors that have been thru similar cycles.