>But as to the efficacity of monetary policy: how much of the bubble's
>deflation should we attribute to monetary policy? Someone in FT last week
>complaining that AG brought the bubble to a screeching halt--a proposition I
>find difficult to follow. Would earnings reports been rosier with interest
>rates 1.5% lower?
What earnings?
As the old joke goes, at the peak, stock buyers weren't merely discounting the future, they were discounting the hereafter. So they were chugging along, fantasizing about the day that Amazon.com might break even and Yahoo! turn more than a notional profit. Higher interest rates were the catalyst that made people finally realize that waiting for the hereafter was unsound financial practice. You're right that they didn't have much effect on the actual profits picture, but psychologically they were devastating.
Doug