the Fed needs to hold rates steady at the end of month. this causes the economy to slow down, or sink into recession. the global economy suffers, as USA is still the biggest customer. emerging markets equity bubble pops. Confidence returns to the US dollar. US market again trades at a premium (instead of a discount right now) to the rest of the world. by taking a small medicine now, the Fed has a chance to get it right this time.
High employment levels is the first government worry; not the relation between US foreign stock markets as you suggested. Besides we are in an election year.
I agree, let the chips fall where they may and those that get caught up in the layoffs, will have to learn to hustle, survive and thrive. However, as one poster stated, it is a election year. PERIOD. Thus, unemployment is not good for those in office. The US will limp along with bullshit band-aid moves, the feds will cut rates, Economic Package will pass and Jonny and Sally Sheepole will buy their Cars, TVs, Homes on a new round of credit. The true financial meltdown is not going to arrive IMHO until end of 09 in to 2010. Those years starting will feel like 1929 and the masses will enter poverty overnight. Until then, I would not be surprised to see buyers come in around 11500 or so on the INDU and bid the market back into 13000. Markets do not crash on the way down, they crash on the way up, when everyone thinks the skys are blue and clear. What we are feeling is a serious correction, that will return to a Bull Run. IMHO E
The US is going into recession period. It doesn't really matter if the Fed holds rates or cuts by 200 basis points, the business cycle dictates that this expansion train needs to catch it's breath, and it's been going so hard for so long, catching it's breath will be more than at trend growth. The question is the severity of the recession. If the fed fails to act and pessimism dictates with the west coast economy on pins and needles on account of writers strike and halted activity there, slow durable goods sales/production for what's left of good paying blue collar jobs, and a construction slump that threatens more than just the housing sector. The Fed needs to act brashly but use some language that accepts the fact that a recession is a necessary part of the economic cycle. Instead of trying to prevent that from happening, they need to be working to ensure that the economy doesn't spiral out of control - which, frankly, seems to be a realistic possibility. At least for the next while, I'm staying long SDS