To: Lucretius who wrote (201889 ) 11/3/2002 4:45:38 PM From: Zeev Hed Read Replies (1) | Respond to No there is nothing that will "heal" the basic capacity excess in the worldwide economy they can do right now, but to get demand to very slowly inch up (which it is). As for interest rates and borrowing costs, an increase of .25% in the fed base rate will have no impact on these costs, those that are not let in the borrowing windows, will still be barred, and those that are allowed in, the impact of such raise will be minimal. Most corporate borrowing is tied to LIBOR anyhow, and we are so much lower than in Euroland and the UK, that such a minimal rise will have absolutely minimal impact on domestic borrowing costs. Volker did not raise rates to 20% and kept them there, he raised them in a spike fashion signaling psychologically to the market, more than actually increasing borrowing costs for less than a quarter. The psychological signal had its desired impact, and the new direction post the 20% peak (direction of rate starting down) was more important to the market than the actual peak. We got a very nice bull move after that raise, though not yet the start of a bull market (that took till August 82).
