MACROECONOMICS IN THE WALL STREET JOURNAL
The period from Sep.10, to Nov.8, 1999 was characterized by the same low inflation that basically led the bull market.
September's PPI report, showed a 1.1% rise, the highest monthly figure since 1990, which had a serious impact on the Dow.
The chart below shows the volatility of the Dow during the period of this assignment.
Regarding globalization, an Oct. 29 story about Rite Aid spoke to the macroeconomic impact of derivatives exposure. As Berner reports, Rite Aid Corp. has to pay higher interest rates and hefty fees under the terms of $2.7 billion in loans it renegotiated. "The nation's third-largest drugstore chain said it will pay the London interbank offered rate plus three percentage points on a $1.3 billion line of credit. In addition, it will pay Libor plus 3.5 percentage points on another $1 billion credit line, a $300 million term loan and $100 million in other credit facilities" (Berner, 1999, 12).
Libor has become one of the leading economic indicators globally and the increase suggests the escalating power of FX, and the risks inherent in derivatives exposure. Part of the problem with the exposure is that Rite Aid's interest rates on the renegotiated bank loans are above 9%. Berner states that as Rite Aid's credit rating slipped to below investment grade last month, it could no longer roll over its commercial paper, forcing it to turn to the bank loans as a source of funding.
Another article that suggested the impact of globalization was the article "Help the World Connect" which addressed the issues attendant to developing a corporate social conscience.
Oct. 13, 1999, saw an impressive article detailing the
Challenges for monetary policy determined at Jackson Hole.
One of the themes of the conference was that there is an emerging consensus about the objectives of monetary policy, one that has been reflected in the conduct of monetary policy i...