At 05:55 PM 3/5/2006, you wrote: >Contrary to popular opinion, neither the political party in power >nor the president has much control over the general US economy. >Economic cycles wax and wane, based on many factors so >complex that no one can forecast them with any assurance. > >Gary VanderMolen
Well, yes and no. The Fed created the tech bubble(easy money policy), and not long after it popped, the recession started. Any gains in the stock market currently are the result of inflation, and the DOW is at 1998 levels, once adjusted for inflation. After 9/11, the fed loosened up the money supply to prevent a more severe shock to the economy, which created the housing bubble(really easy money policy). The government is borrowing and spending like crazy, and the fed is enabling them. The only thing keeping this whole mess afloat is the willingness of foreigners to lend money to the US, which likely won't last much longer. With the Yen Carry Trade coming to an end, that will mean a lot less purchasing of treasury bills, which drastically reduces the ability of the government to borrow, so they will either need to raise taxes a lot, cut spending drastically, or inflate the money supply into worthless territory. They seem to prefer the last option. Anyway, if you keep! an eye on the interest rate yield curve, the signs point to *another* recession on the horizon, although that's not a guarantee. My point is that the feds and the FED can have a surprising impact on the economy... they don't make the trends, but they tend to push it harder in whichever direction it's going. If you want more detail, I highly recommend the book "Empire of Debt" by Addison Wiggin and Bill Bonner. You can also poke around on their website, www.dailyreckoning.com Julian
