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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (15240)	2/20/2002 1:56:16 AM
From: Moominoid	Read Replies (1) \| Respond to of 74559

Interest Rates? Really, who knew they could actually be important after Japan's experience. I think you have to dig a little deeper. I think you have to ask yourself, in the cold hard light of day, why is it that when short rates in the U.S. crashed from 6.5 to 1.75, the market said nyet. Without the cut to 1.75 the NAS would already be at 500 <ng> Japan is in a depression.... and interest rates can't be cut further. My scenario for the US is rising interest rates - these will directly impact stocks through domestic investors choices and the impact on the economy down the road and also they will cause foreign investors to pull their money out in a self-accelerating decline as the USD goes down (interest rates are working in the opposite direction on the FOREX market than in the standard macro textbook treatment). Then the Fed will get into a second round of panic cutting down to the magic zero number as the NAS dives under 1000, Dow below 7000 etc. etc.... All IMHO of course. David

To: Raymond Duray who wrote (15240)	2/20/2002 2:12:25 AM
From: Gary H	Read Replies (1) \| Respond to of 74559

As the old Cowboy Philosopher "Will Rogers" once said, "There are far too many people spending money they don't have, to buy things they don't need, to impress people they don't like. I'm counting on it. Good time to hunker down.

To: Raymond Duray who wrote (15240)	2/20/2002 10:15:07 AM
From: AC Flyer	Read Replies (1) \| Respond to of 74559

>>Buy (sly little hint fer ya) 2008, things ought to be looking up from a very long fallow period in the cycle<< Interesting, because 2008 is about when things will start to turn nasty, imho. However, anyone who can predict the future 6 years out is wasting their time here.

To: Raymond Duray who wrote (15240)	2/20/2002 2:08:23 PM
From: Ilaine	Read Replies (2) \| Respond to of 74559

Re: Liquidity traps: >>A Liquidity Trap? by: Allan H. Meltzer Carnegie Mellon University and the American Enterprise Institute No country has ever been in a liquidity trap, and Japan is not in one now. Statements to the contrary are based on faulty analysis. A liquidity trap means that increases in money by the central bank (monetary base) cannot affect output, prices, interest rates or other variables. Changes in the money stock are entirely matched by changes in the demand to hold money. The idea of a liquidity trap originated with Keynes during the Great Depression. Keynes conjectured that once the interest rate fell below 2%, monetary expansion might not work. It would "push on a string". Even he recognized that a liquidity trap had never occurred. In fact, monetary policy was powerful during the Great Depression. Deflationary monetary policy was the major cause of the economic collapse from 1929 to 1933. Once President Franklin Roosevelt abandoned the gold standard and devalued the dollar, gold poured in, the monetary base and money rose. Output expanded rapidly; real GNP rose at more than 10% average annual rate in the next three years. The fact that a short-term rate in Japan is near zero tells us more about mistaken monetary policy has done than what proper monetary policy can do. Prices are not stable, they are falling. Interest rates are not constant, they are falling. The Bank of Japan could stop the interest rate and price decline by purchasing foreign exchange, corporate bonds, or other assets. Such purchases would increase money growth, end deflation, and promote recovery. Monetary policy works by changing relative prices. There are many, many such prices. Some economists erroneously believe there is a liquidity trap because they think monetary policy works only by changing a single short-term interest rate. If the Bank of Japan follows through on its recent commitment to increase money growth, this way of thinking will be falsified, as it was during the Great Depression and on many other occasions.<< More at: gsia.cmu.edu