Upcoming Fed Cut?

Mon Sep 7 13:54:55 PDT 1998

Jason Hecht writes:

>I'm not sure we're at the flat part of the LM curve, though certainly
>Japan is!

Maybe that's why the Bank of Japan has been buying loans and commercial paper, rather than just government bonds, since November of last year--a pretty radical break with orthodox central banking, and a precedent for the Hong Kong Monetary Authority's purchases of stock.

>With a 5.35 long-bond, that could easily spike down or UP (remember 1994
>was the worst year for bonds in many, many years

February 94 to Feb. 95 was Greenspan's last great effort at liquidating stocks, real estate, labor, etc...so much for the theory that central banks should raise short-rates in order to crush inflationary expectations and thus bring long-rates down. I don't see much upside potential for long-rates right now, especially in light of all those trillions in Japan's postal saving system that are going to be available for investment in U.S. governments, come Jan. 1.

Edwin Dickens

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