March 09, 2008

Stocks may fall anew on recession fears

NEW YORK (Reuters) - U.S. stocks could face a further pounding this week as evidence mounts that the economy has entered a recession and problems in the financial sector accelerate.Those problems in the financial sector are due to bad practices like the lowering of the discount rate. It has an eerily similar feel like another time in our history."Nothing did more to spur the boom in stocks than the decision made by the New York Federal Reserve bank, in the spring of 1927, to cut the rediscount rate. Benjamin Strong, Governor of the bank, was chief advocate of this unwise measure, which was taken largely at the behest of Montagu Norman of the Bank of England....At the time of the Banks action I warned of its consequences....I felt that sooner or later the market had to break."Money baron Bernard Baruch in Baruch: The Public Years (1960)

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