Rakesh: Note that the end of my last posting also stated that huge federal deficits are necessary along with lower interest rates. I would also through into the mix tax cuts for the low and moderate income households. Other options may also be necessary. peace, patrick At 10:03 AM 10/31/01 -0800, you wrote: >patrick wrote: > > >. In part, the Fed initially raised interest rates to squeeze out > > stock market speculation, to bring price-earnings ratios back in line with > > historical averages. >yes but haven't P/E ratios risen even farther vis a vis historical averages? >doesn't this suggest that the primary effect of the rate reductions has >been to >finance an asset inflation. Perhaps through second mortgages to buy into what >was believed to be the bottom of the market? > >So, I don't think Greenspan et al. are particularly > > distressed about the current level of stock indices even if they are > > carefully watching the direction of movement. > >shouldn't he be distressed by the current P/E ratios? > > > > > If lowering interest rates is futile, do you prefer rising interest rates? > > Constant nominal rates with declining inflation - in which case we get > > higher real interest rates? > >All of these options may not point a way out. > >Rakesh
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