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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: pvz who wrote (17564)	11/6/2002 1:45:33 PM
From: que seria	Read Replies (2) \| Respond to of 23153

pvz: Fed may cut in the vain hope that banks will lend more money cheaper, or at least get a better spread to induce them to lend money they now aren't lending, rather than do what they have been and will keep doing: buying T-bills and notes and banking the spread at no risk. If businesses (and soon consumers) aren't anxious to borrow as before, lowering rates another .25-50 isn't going to matter. I agree cutting makes no sense here, from anything I've seen published. Of course the Fed has more comprehensive and timely data, and once I would have said it has much better judgment about such matters. I go with the "tough love" Austrian school of economics, which holds that the natural (and especially gov't-enhanced) dislocations of the business cycle must periodically be worked out in the market, and gov't efforts to forestall that process will only protract and exacerbate the misery that readjustment brings. So much for conventional wisdom that the market would rise into the meeting and fall after, as was my bet. Hard to believe it can rise much based upon the Fed exercising one of its options, unless it shows conviction about the economy and freedom from media/institutional pressure by not raising.