Fed wonders - where's the rebound

[Brad DeLong]

>For the real sector, yes. But quoting more of the story:
>
>>First, when the Fed cuts rates, the value of the dollar usually 
>>falls, making U.S. exports cheaper for foreign buyers and thus 
>>stimulating U.S. production. But that hasn't happened this year. 
>>The dollar has kept rising, and exporters are furious.
>>
>>Second, lower rates usually give the stock market a boost, which 
>>can stimulate consumer spending as household wealth increases. But 
>>stock prices have remained stubbornly weak, particularly for 
>>high-tech companies whose share prices have plummeted from their 
>>speculative peaks of more than a year ago.
>>
>>Third, short-term rate reductions usually also bring down 
>>longer-term rates, which encourages businesses to invest more in 
>>new plants and equipment because it is less costly to borrow. But 
>>many companies have a large inventory of unsold goods, and 
>>high-tech manufacturing firms in particular have lots of excess 
>>production capacity because of the investment boom that ended last 
>>year. Companies in such straits are not likely to increase their 
>>capital spending simply because interest rates have fallen. 
>>Moreover, long-term rates have dropped only modestly so far.
>
>So they were expecting a quicker financial sector reaction.
>
>Doug

But... but... they don't *want* a higher stock market, and they don't 
*want* people believing in a Greenspan put... and you never expect 
much of a kick from non-interest sensitive manufacturing 
investment... the dollar is, however, puzzling...