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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (9356)	3/26/2001 3:40:27 PM
From: Allen Benn	Read Replies (3) \| Respond to of 10309

If people are not spending money, or are in fact saving money, placing it in cash, can a loose policy be sufficiently effective? To put it another way, does a drop in the velocity of money offset the benefit of more money? Of course you are correct that more money stuffed under a mattrice does not a stock market rally make. But when the Fed adds liquidity to the economy, there is every reason to believe that the money will be put to use, not simply stored somewhere because consumers are reticent to spend. While the consumer does represent two-thirds of spending, corporations spend lots on expenses and capital expenditures. Capital expenditures are sensitive to interest rates AND the willingness of banks to make loans. The Fed can influence both sides of this equation directly. As long as consumer confidence doesn’t tank altogether, and we don’t get caught in a deflationary spiral, I suspect any pickup in economic activity will be met with consumer enthusiasm (i.e. spending). The consumer will be helped along also if Congress moves aggressively on tax reduction. Allen