"Federal Reserve Chairman Alan Greenspan emphasized on Monday that the U.S. central bank had no choice but to raise short-term interest rates in the months ahead to prevent the economy from overheating."

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-- Zdude (zdude777@hotmail.com), March 06, 2000

Answers

Here is my prediction:

Because all of the "stock market pollies" have not and will not listen to Greenspan, he will raise rates 1/2% on March 21, not 1/4% as expected. This will finally get the attention of the Nasdaq gamblers. The tough part will be for Greenspan to control the exodus from stocks so that it does not turn into an unmitigated disaster.

-- J (Y2J@home.comm), March 06, 2000.

That "new technology" speech was essentially a repeat of his Humphrey-Hawkins testimony. Mr. G has not changed his mind or his approach. He is unlikely to make any sudden moves (1/2 point seems too aggressive when 1/4 point moves have gotten sufficient attention), but he is equally unlikely to stop patiently bumping up rates until he sees some definite slowdown. It's ironic that the "Old Economy" stocks are currently bearing the brunt of these moves when it's tech that's gotten everyone in a lather.

Watch closely, though. The bloom is coming off the dot-com rose and biotechs (which are sooooo 1980's) have not proven a very safe haven for all that Nasdaq cash. If the "New Economy" meme begins to lose its power to excite, tech will washout in a great, messy hurry.

-- DeeEmBee (macbeth1@pacbell.net), March 06, 2000.

Well, we ALL learn from our mistakes. I remember having money in the stock market in the early 80's. My neighbor had her money in CD's that were making 11-14% in interest. I left the market when it went to 600 [NO missing zeros there, folks.] Buy high, sell low, ya know.

So, I lost a few bucks [gulp]. I'm older [and wiser] now, and I'm out of the market until I see how things go. Rising interest rates didn't affect the economy [that *I* noticed] in the early 80's, and rising interest rates NOW wouldn't affect that much either, IMO. It's a choice folks make.

[The above opinions are given with absolutely NO facts to back them up....ONLY experience.]

-- Anita (notgiving@anymore.thingee), March 06, 2000.

Chart: Inflation vs. Short-Term Interest Rates

In the late 1970's and early 80's, the Volcker Fed went to war with inflation and took the Fred funds rate up to almost 19%. As the chart shows, this approach finally broke inflation's back around 1982 and it fell from 12% all the way down to about 4%. Interest rates then followed suit and tended down in the late 80's, with the economy recovering nicely. They spiked up briefly around 1989 and dropped again when recession reared its head in the early 1990's. We've hovered around 20-year lows in rates since then and it seems much more likely that they'll go up than down from here.

Higher interest rates will eventually slow things down. Unfortunately, too many stock market "players" believe otherwise and are betting that (a) tech stocks are immune to interest rates and (b) Alan Greenspan wil rescue them from a stock market decline. This seems rather unwise, but c'est la vie.

-- DeeEmBee (macbeth1@pacbell.net), March 06, 2000.

The Way I see it,the "Investors"will dump all that Wall Street Paper Trash,convert it into real Money,just in Time for Greenspan to raise Interest Rates,so the "Investors"can now "invest"into the Money Market,ripping off the Public once again.

-- Observer (no cash@home.gone), March 06, 2000.