Prague Twin

Wednesday, October 31, 2007

As Expected

The Fed cut its prime lending rate today to 4.5%. Right on cue, the stock market surged (after an initial drop of 100 points on the Dow) and the dollar dropped to close to $1.45 to the Euro. But don't worry about the dollar dropping further, it is blessing in disguise says the former editor of The Economist.

True, a weak dollar is boosting exports. But what will happen if the U.S. can't fund its current account deficit?

We may find out soon.

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5 Comments:

  • Like I've said before, I'm not a financial whiz but I can't thinking that we are headed for a recession of some kind.

    By Anonymous rockync, at 5:22 PM  

  • Strong annual growth, again, this last quarter; record tax revenues. Are these earmarks of an impending
    recession? Oil does seem a trifle high though. I hope that spike doesn't gum up the works, to mix metaphors. Eventually there will be a recession but probably not this year or even the next. Past 18 months I can't even pretend to see.

    By Blogger Roger Fraley, at 10:21 PM  

  • Backward looking data, and remember the GDP you cite are from the advanced reading: huge revisions are likely.

    At any rate, I've long contested that the peak of the crisis will be in about a year from now.

    I'm not saying recession, yet, but certainly all is not well.

    By Blogger Praguetwin, at 10:53 PM  

  • I saw a news blurb about consumer confidence being down equating to less spending which has retailers worried. Once shoppers stop shopping, seems like that will gum up the works, no?

    By Anonymous rockync, at 12:53 AM  

  • Rocky,

    Confidence is just a way of saying sentiment. Spending is still strong, but should shoppers stop shopping, yes that will gum up the works (consumption accounted for over half the GDP growth in the last quarter) but in my lifetime, I've never seen Americans stop shopping.

    By Blogger Praguetwin, at 7:08 PM  

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