At 10:50 PM 4/18/01 -0500, Jeff Bone wrote:
>I was being flip, BTW --- I don't really think the *purpose* of all the rate
>increases was to cause a recession, but I think that may well be the
>won't know for sure until later, but you tell me --- this *feels* like a
>recession, doesn't it? In Austin, for instance, there's been no change in
>prices since last year --- because there's too little liquidity in the housing
>market right now to set new comparables! (My realtor told me this just the
Doesn't really feel like a recession yet, only a problem for us
entrepreneurial types who want to execute on high-growth business models
with other people's money. It seems like real wages are getting cut for
some job descriptions, but not nearly a majority.
<http://www.nytimes.com/2001/04/12/technology/12REVI.html>, which quoth:
>The California Employment Development Department reported this month that
>the state's unemployment rate dropped to 4.5 percent in February, a
>32-year low. (It was 4.4 percent in December 1969.) The unemployment rate
>last month in Santa Clara County, which largely defines Silicon Valley,
>was 1.7 percent, indicating that only 17,600 people were jobless in a work
>force of 1,004,900.
>Even in San Francisco, which has been more dependent on e-commerce
>start-ups, unemployment was 3.2 percent, up from 2.6 last year.
In response to another point, the Fed's job *is* to engineer short-term
fluctuations in the money supply. That's the goal of monetary policy;
longer-term stuff is in the realm of fiscal policy. Debt financing affects
the consumer economy, which is nowadays highly dependent on credit, so it
makes sense to brake the consumption-side exuberance by altering the rates.
But the dot-conomy was more about equity financing, and at the transaction
level that's pretty disconnected from debt financing rates until you get
into very low valuations. One problem is that some of the significant
inflationary forces - wages & home prices in urban areas, for example -
were connected to this equity market, while the most debt-dependent areas
of the economy, manufacturing/construction/etc. didn't have a whole lot of
"froth" that could be taking out. So trying to yank the NASDAQ down with
money-lending rate changes is kind of like trying to stop a rolling car by
pushing on it through some jello - hurts the jello quite a bit before you
transmit much decelerative force to the car. I'm conflating some supply
side and demand side forces here, but you get the picture.
People are still spending a helluva lot of money, though. See
<http://biz.yahoo.com/c/01/04/cal2.html> and look at the Retail Sales, down
.2% between Feb and March, and Retail Sales excluding autos, down .1%.
Basically what that's saying (correct me if I'm wrong here) is that a
retailer who sold $100K of goods in Feb sold $99,900 of goods in March;
that's survivable. If we string some months together like that, that's a
recession, but we're not there yet and everyone's 401(k) blew up four
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