Even the bellwether large caps hve been humbled by the market's spectacular descent. Intel, Microsoft, Cisco, Oracle. We may now be at a point where the collapse of the technology bubble, far from being limited to investors and Wall Street, may acquire an ominous macroeconomic significance. US Federal Reserve Chairman Alan Greenspan's reluctance to cut interest rates despite clear evidence of distress in the international capital markets makes no sense. The latest GDP growth numbers are the slowest in four years.
Inflation is nonexistent.
Commodities and metal prices are stagnant. Credit spreads and loan default rates are extremely high. The currencies and stock indices of the emerging markets are a prima facie indicator of deflation, not inflation, risk. The dollars extraordinary strength in the foreign exchange market proves that monetary policy in the US is far too tight. It is time that the US central bank realises that its obsession with its own arcane inflation models have created a serious risk of recession in the financial markets.