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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Jay who wrote (459)	1/5/1998 1:25:00 AM
From: Rational	Read Replies (1) \| Respond to of 9980

Jay: Dropping interest rates should have worked but for the reason that it will make US stocks still more attractive bringing in more overseas funds. I think the reduced rate (with .5% cut) will continue to remain higher than the Japanese rate. Somehow US stocks will have to appear less attractive to investors to pull out their money to Asian markets. The situation is quite complicated for the Fed because of a decline in corporate profits due to overcapacity and competition everywhere; except that most investors in the US are still not believing it. Thus, the Fed may simply apply the gradual increase in money supply, while waiting for the erosion of US corporate earnings makes US stocks less attractive. [Recall Greenspan's irrational exuberance comments; that did not work since money from everywhere continues to flow to the US to prop up insanely bubble stocks.] Sankar

To: Jay who wrote (459)	1/5/1998 11:40:00 AM
From: RagTimeBand	Respond to of 9980

Jay >>I am no economist, but IMHO the simplest solution is to drop interest rates maybe 0.5% right away.<< FWIW - From what I've been reading the Fed has reason(s) to raise rates and would have if it weren't for the Asian situation. IMHO dropping rates would fan the flames of inflation. Now if they sold some (how much, I don't know) gold I could see the following as a possible scenario: Our dollar drops, our market corrects, American companies continue to grow earnings and the Fed (either directly or indirectly) gets a raise in interest rates. Keep in mind that the above and $2.00 will buy you a cup of coffee. Regards - Emory Regards - Emory