How Low Can the Fed Go

Discussion
Nov 06, 2002
George Anderson

By George Anderson


It is widely expected that the Federal Reserve Board will vote to reduce interest rates in another attempt to jumpstart the economy. Wall Street analysts are looking for the Fed’s Open Market Committee to cut interest payments to “four-decade lows”, says Reuters.


Moderator’s Comment: What will a Fed rate cut mean
to the economy, consumer purchasing and the retail industry?


There’s an excellent article on the Wall Street Journal
site today detailing the Fed’s current fight against deflation. The piece written
by Greg Ip is entitled, “Inside
the Fed, DeflationIs Drawing a Closer Look”


Mr. Ip’s article reminded us of something we wrote back
in December 2000.

How the Greenspan Stalled the Economy!

By George Anderson

Every investing investor likes shares to go up.
But the Greenspan at the Fed said enough is enough.
The market is crazy.
Kid geeks getting rich.
Paper millionaires and dot-coms, it just made him twitch.
The Greenspan hated inflation more than boiled prune stew.
It had to be wiped out, what could he do?
Last year and this, he fumed and he fussed.
“I’ll rate hike and rate hike, inflation I’ll bust.”
“I must find a way, if it’s the last thing I do,
to slow the economy, the one they call new.”
But around him were doubters. They thought he was nuts.
Forget about rate hikes give us some cuts.
The prime rate ascended. The cost of borrowing went up.
The Greenspan never wavered. He wouldn’t let up.
One hike, two; three, four, five and six,
the Greenspan continued, inflation he’d fix.
Everywhere he’d turn, no inflation was found.
But, he didn’t care. It must be around.
Now business has faltered.
Many dot-coms have flopped.
Earnings are down.
Will the Greenspan now stop?
Unemployment is rising.
The stock market’s down.
There is no soft landing.
We’ve plunged to the ground.
Last week in New York the Greenspan did speak.
To community bankers, the man is a freak.
He concluded and alluded that inflation was tamed.
The market went crazy. Our nest eggs are saved.
But why, we wonder. did it take so long
for the Greenspan to realize he was terribly wrong?
But enough of the past, let’s look straight ahead.
What can we expect from the Greenspan and Fed?
The Greenspan and cronies, together will meet and rates they will lower.
Oh, won’t that be a treat? [George
Anderson – Moderator
]

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