Soft lunch, free landing
THE cue for cuts in interest rates will now come not from the stock market but from the economy. They will start to fall when the economy has plainly started to slow down, and a falling stock market does no more than predict that the time is nearing. Meanwhile dear money makes itself felt. Companies have spent their cash and built up debt to finance heavy spending on new equipment and also on stock. They can refinance themselves by offering new shares — and goodbye to the bubbly notion that shares would stay in short supply. Or they can cut back on their spending (no doubt on their wage bill too) and clear out their stocks for what they will fetch. That is not good news for the stock market, either. What the wild waves are saying is that our troubles will not go away, that funny money from the stock market or magic money from the central banks will not come to our rescue, and that — to repeat a City and Suburban maximum — a soft landing is about as credible as a free lunch. Stand by for the tear jerker.
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