Interest Rate Cuts - How They Affect The Private Equity Markets
Written by Jay Turo on Tuesday, January 29, 2008
An overlooked benefit of The Federal Reserve Board cutting interest rates by 75 basis points last week and an expected additional 50 points is the palatable benefit it has and will have for equity investments:
Further to this point, the noise of the chattering classes often drowns out the remarkable resiliency of American capital system. In America, there is an enormous institutional commitment to maintaining stability and fluidity to economic markets. Rarely do things, on a macro level, get out of balance either very badly or very exuberantly (or when there is exuberance, it is usually contained to a particular sector).
It is no accident that the United States is the unrivaled venture capital investment center of the world, and no accident that a significant plurality of most the leading technology companies in the world are American firms. Capital usually feels safe in the United States, and it is safe capital that inve sts in growth investments. Stable monetary policy, which Americans often take for granted, plays a key part in inculcating this sense of safety.
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