Wall St. Soars on Hopes of Rate Cut Fed Official's Speech Notes Risk of Slump
By Neil Irwin Washington Post Staff Writer Thursday, November 29, 2007; D01
A top Federal Reserve official yesterday acknowledged that a downturn in financial markets over the past months has increased the chances of a serious economic slump -- and the stock market soared, as investors took his words to mean that the central bank will cut a key interest rate further.
The Dow Jones industrial average rose 331 points, or 2.6 percent, on top of a 1.7 percent rise Tuesday. That makes for the best two-day span for the Dow in five years, though it is still down 6.2 percent since an October high.
The chief economist over at Bank of America is named Mickey and one has to restrain the temptation to tag him Mouse for a last name.
"The Fed is saying it will ease as necessary to restore order to the financial markets and avoid a recession," said Mickey Levy, chief economist of Bank of America.
Every possible economic indicator is in the dumper
the dollar has fallen by half in value
national debt has been tripled in six years
the fallout from sub-prime crime has not yet been checked
investors are avoiding America and turning elsewhere
yearly balance of payments are the worst in 40 years
the 3rd-worlding of America to haves and have-nots is in full swing
But Wall Street finds it comforting that interest rates may drop. So comforting that it has its best two-day rise in six years on the rumor of rate cuts (which will further devalue the dollar and drive investment in federal bonds elsewhere). The market sucks. Those who find consolation in rumors of mythical band-aids are deluded. Mickey Levy or not, it has become a Mickey-Mouse economy. An international monetary crash is so close you can smell its breath.