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  • dcxavier dcxavier Jan 29, 2001 3:31 PM Flag


    I am lightening up in anticipation of a 1/4 point rate drop this week. 1/2 + 1/2 in less than one month seems very drastic and out of character for Mr. Greenspan. His endorsement of tax cuts is a long term thing and wouldn't affect the economy in the short run. I believe that Mr. Greenspan was shocked at the huge Congressional spending prior to the election and picked tax cuts as a pragmatic solution. Like President Reagan's approach, the most effective way to stop the free spenders is to choke off their oxygen supply. In the short term though, I believe a 1/4 point cut (instead of 1/2) will be driven by an upcoming announcement of a reduction in withholding rates, which puts cash in people's pockets immediately. This has also been in the news recently.