Praetorian wrote:
I wonder if there is a study of whether the Feds interest rate cuts affect real economic factors such as GDP.
I don't know if the stock market is a strong reflection of the economy anymore - A lot of companies have become multinationals and often generate a significant proportion of their revenues overseas, others are accepting money from sovereign wealth funds and are flush with cash -- it is difficult to say where the economy is headed.
In theory, interest rate cuts should spur increased borrowing and investment. And because of the multiplier effect, this should then positively influence GDP based on the increased spending and investment. However, America is no longer the traditional economy that it once was, because it is now a service-oriented one with 70% consisting of consumer spending. Where will the additional borrowing and investment go? Pay off debts?!
And like you said, many of the big companies with the big pockets derive profits from and invest heavily overseas. IMO, we are in the process of a major shift in the international economic and financial system from the West to the East. China will probably become the largest economy before the end of this century. What products does America actually produce besides airplanes, military weapons, and federal reserve notes? OK, I'm being slightly facetious.
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