The Markets: What's Going Down

It's perverse: the better the economic news, the more the markets dive. How long can the little guys keep their cool?

Damn! The economy is strong. Production, sales, incomes are up. More people are finding jobs. Damn! Nobody on Wall Street would use those exact words; they sound too hardhearted. But the essential thought is voiced by many analysts trying to explain last week's sudden bust in the stock and bond markets (which is no easy job). In extenso, their reasoning goes like this: a strong economy threatens a revival of inflation, at least in the minds of the governors of the Federal Reserve Board. It also means higher interest rates: automatically, because of rising loan demand from business and consumers, but...

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