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Non-Tech : Money Supply & The Federal Reserve -- Ignore unavailable to you. Want to Upgrade?

To: JBTFD who wrote (170)	8/12/2002 3:18:28 PM
From: GraceZ	Read Replies (1) \| Respond to of 1379

That's correct, they are always fixing the last mess created from the last fix. Its what is called the square well. A normal cycle builds up slowly and creates its own counter reaction incrementally. When the Fed holds rates below market to try to artificially prolong prosperity then the forces that would normally come to play to dampen are held back. The amplitude of the wave is increased and a wave which would normally be a reasonable slope with a topping action is turned into a hyperbole. At the point where the hyperbole becomes apparent (which is always after the fact because information gets to them with a lag) they then react with a hard 90 degree turn (even though the market may have information that is forthcoming that proves this hyperbole may already be correcting). They feel they have to attack (storm) their previous mistake because now they see its out of control of normal market forces. They do this in both directions and each time the wave increases in amplitude.