Forum Archive Index - September 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

I read that the US and the FED took the following  previously unheard of measures before the opening of trading:

 

1. A 0.5% cut in interest rates ( The same cut was applied in Euroland and the footsie immediately rose 143 points after a savage decline previously ). The Fed is prepared to cut further.

 

2. A wall of money, some $ US 118 mill. was transferred from Treasury to the US Banks to oil the markets.

 

3. A temporary relaxation of buyback trading. Easier credit together with this relaxation made a maximum buyback possible.

---

Even so, after heavy trading, at closing time:

 

Dow:      - 684 points or - 7.13 % to 8920.70 points.

 

Nasdaq   -                    - 6.83 % to 1579.55 points.

 

In my opinion, a creditable record percentage wise; the market was in the process of negative adjustment before the attack anyway and the closure of the stockexchange merely short circuited the time needed to do that.

 

At this stage, the effects of the rapidly following US interest cuts still need some time to be felt, many commentators agree, but tax cut cheques will be arriving.

 

The question is: Will it be spent or used to pay off the already heavy personal debt. My guess is that the latter will occur and this could prolong the recession somewhat. 

 

This in turn increases the chance that the combined effects of the above mentioned stimulants may keep any normal expected increase in inflation later on, to a minimum.

---

The question now is: Has Brash made a tax cut yet as every one has done!

 

Or does he want to wait again till the signs of deterioration start showing and by then the damage is done.

 

Contrary to what some people may think, this country has not been blessed by the policies of the Reserve Bank in the past.

 

Gerry