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What if the Stock Market Listens to the Fed?

14 March 2008 - Features - Editor

There must be political reasons for Wall Street and Washington wars. Has the Fed become a favorite whipping boy? What do the academics have to say on the matter? You have to concede consistency to the Fed. The spate of interest rate reductions must have been deliberated at length. Some of our best economists have helped put the stimulus package together. Surely, it cannot be all bad. Why does the stock market not respond more generously?

There are three important objectives that the Fed wants to achieve. All stock market quarters can help the country by chipping in. Time, jobs, and inflation are three Fed aims in which we can all play parts. It is in the national cause, but it will not hurt our stocks either. How does this work?

The stimulus checks are still more than a month away. Therefore, it is not logical to expect the Bush package to work as yet. India’s Finance Minister has asked people to spend half their freebies, and to save the rest. The freebies were parts of his latest budget. Why should we listen to him anyway? Read about him in our earlier publication at this link: Can We Outsource the Fed?

Now for jobs: discourage outsourcing. Use all your dollars to support jobs for Americans. There is no harm in handing out work to call centers when our pockets are full. However, this is time to do all charity at home. Not all of us are employers, but everyone is a consumer. Put money in to products and services that promote employment – US employment.

Finally, there is the inflation threat. Peter Senge (see Back to Business Management Basics to Survive in Today’s Stock Market) has a great example in his celebrated book. It is a story of how rumors and false expectations can fuel inflation. Again, we are all consumers. We can support the Fed by helping to buy responsibly.

All of us stand to gain most if the Fed’s medicine works. Let us give the folks who manage our economy a chance. Jumping the gun will only make us stumble. Do you agree? Join our forum and hold forth on what you think of the stimulus package, the interest rate cuts, and all the other strenuous efforts of the Fed to bail us out of the stock market crisis.

 


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