rate cuts

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

[was: Re: [PEN-L:13799] Re: RE: Re: Re: RE: Re: RE: relevance]

At 04:06 PM 6/21/01 -0400, you wrote:
> Mark Jones wrote:
>
> > why is there this slowdown that the Fed
> > can't help by reducing rates?
>
> Because it's more of a 19th century slowdown than a post-WW II one, with a
> financial hangover from the burst Nasdaq/tech bubble, and a real sector
> one from overinvestment in gadgets. It's probably going to take some time
> to work through it.

it's possible that if Greenspan keeps lowering rates, the U.S. economy will
suddenly spurt forward. In that case, he'll have to raise them again to
avoid inflation, which has always been his main concern.  Isn't this one
reason why Uncle Miltie argued against fine-tuning?

(Also, if rate cuts work, the policy does so by making one of the U.S.
problems -- high private-sector indebtedness -- worse. It might help the
U.S. economy by lowering the dollar, which would help fight U.S. external
indebtedness, but that steals demand from other countries.)

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine