irrelevant rate cut

[Chris Burford <cburford@xxxxxxxxxx>]

It is interesting when you remember how closely the markets used to hang on
the slightest hint from Greenspan about the likely direction of interest
rates, how a .5% rate cut is regarded today as almost irrelevant to the
fundamental direction of the economy.

Money has been "burning" in the tech sector, and the airlines. It is just
about to burn in the crucial automobile sector. In fact it has been burning
already because high car sales have only been sustained by actually
discounting the capital value of those goods in terms of prices, to the
consumer. Car sales are predicted to look bad in December and January.

Clearly something else other than the interest rate, is the rate limiting
step on the US economy.

Could it be the rate of profit, and the impossibility of sustaining this
any more domestically without squeezing the consuming power of the
consumers. And now the vicious circle is going to set in with further lay
offs of workers.


So as base interest rates fall, the new investors jargon is where can we
park money? Hoping presumably that there won' t  be a fire sale on the
parking lot.

It seems that reducing interest rates is now forcing accumulated cash to
share out its low rates of return, and the risk of further destruction.


So finally for some international reasons which we do not fully understand,
the US economy is no longer been able to export its unemployment.

Greenspan may as well go back to playing the saxophone in his retirement.
Or does he want to achieve 1% interest rates by Easter?

Chris Burford

London