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To: Sarmad Y. Hermiz who wrote (6782)11/7/2002 10:30:19 AM
From: Cary Salsberg  Read Replies (2) | Respond to of 95615
 
RE: "The fed rate cut is to stave off deflation caused by cheap imports from China."

Lower rates mean lower dollar and higher inflation?

Lower rates mean consumers will buy more imports from China and more demand will increase prices?

Please elaborate.



To: Sarmad Y. Hermiz who wrote (6782)11/7/2002 10:39:31 AM
From: Sam Citron  Read Replies (2) | Respond to of 95615
 
Unless your tongue is planted firmly in your cheek, I'm not sure I understand you either. The Fed rate cut can't do anything about this source of deflation, can it? I don't see how Fed policy can do much to address the overcapacity issue with interest rates so low already. Is it really going to stimulate aggregate demand that much when borrowers are up to their eyeballs in debt? Maybe it will just stimulate more excess capacity.

Sam


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