March 27, 2006

The Fed is going to raise rates (again) tomorrow. Home sales and prices will continue to plunge. A Blame the Fed movement starts?


Here in the UK, there seems to be this incredible pressure on the central bank to take rates down, as housing prices have been declining to flat for a couple of years.

Those on the Ponzi Scheme, oops, I mean Housing Ladder, are irate that they're not getting appreciation anymore, and blame it squarely on the Bank of England. I'm waiting for the protests in the street demanding lower rates. And the BoE feels the pressure, expected to drop the key rate 1/4 point coming up, after doing the same last year.

So, the same fate in the US? Won't homeowners who see declining prices and declining paper net worth rebel against the rookie Bernanke, and the Fed? Won't they demand a halt to the raising of rates? This is especially interesting given Fed governor Kohn's remarks the other day about not being interested in protecting homeowners' gains these past few years.

I think Ben doesn't stop here, and 5.5% is a no-brainer. Any guesses?

20 comments:

David said...

5.5% max. Otherwise the US economy gets crushed real fast.

Anonymous said...

will keep rates going up to make sure japan, china, korea etc buy us bonds.

Housing is Dead said...

They have to raise rates to support the dollar or else inflation will be much worse than higher rates. A weaker USD means higher oil prices which means across the board inflation that kills the consumer. The consumer drives 80% of the GDP.

Anonymous said...

Gee, if only we DIDN'T have a central banking system, then banks could REALLY compete for your business! Wait a minute - that kinda sounds like that LendingTree commercial!

foobeca said...

It's not like we or the English are going to vote the people in the BoE or the FED out of office. They're going to do whatever they want and they're going to do what is in their best interest and in the best interest of their respective governments.

Anonymous said...

I blame the north american dinosaurs for not having enough baby Dinosaurs before the asteroid struck our planet thus creating our dependence on Middle Eastern oil.

Anonymous said...

If the US used oil at the same rate as Western Europe it wouldn't have to import any.

At any rate the Fed will have to keep on doing Job 1 and that's fighting inflation. Any other strategy and the world would lose what little faith it has in the US$, and the resulting chaos would make the housing meltdown look like small potatoes.

keith said...

I haven't driven a car since december and I love it!

Anonymous said...

I don't know if this will cheer any of you up, but I have been watching this story since last September (see first link) and, as you will see from the second link, activity is picking up.

If this process can indeed produce oil at $30.00/barrel, and give us a reliable source from our own continent our economic and geopolitical risks may diminish significantly.

http://www.rockymountainnews.com/drmn/opinion_columnists/article/0,2777,DRMN_23972_4051709,00.html

http://today.reuters.com/business/newsArticle.aspx?type=ousiv&storyID=2006-03-22T202348Z_01_N16154058_RTRIDST_0_BUSINESSPRO-ENERGY-OILSHALE-DC.XML

Anonymous said...

Hello again,

Sorry the first link didn't paste properly (remedial cut and paste looms), so I'm pasting it in sections.

http://www.rockymountainnews.com/
drmn/opinion_columnists/article/
0,2777,DRMN_23972_4051709,00.html

Anonymous said...

Hell, before they're done with their New and Improved Brand of Voodoo Economic's, American's will be Living under Bridges again or making sight unseen bids on Osama's Cave in an undisclosed Location...Location...Location!

cereal said...

so the illegals are marching up and down the streets of L.A. today it's highschool students. they've actually walked up the freeway onramp and are blocking the harbor freeway.

i don't think you guys heard what i just said. they are walking on the harbor freeway.

demanding free healthcare and subsidized housing.

brokersleaveyoubroke said...

Actually, mortgage interest rates are tied to bonds which follow inflation. People who buy bonds want an interest rate that's better then inflation. If the fed lowers rates and inflation goes ballistic then mortgage interest rates will shoot up too. The housing boom has more to do with China and Japan buying hundreds of billions in treasury bonds then it has to do with the fed.

keith said...

cereal - i just posted the news.

Anonymous said...

how about a free one-way bus ticket to mexico city?

Anonymous said...

Denial, it’s not just a river in Egypt

By Mike Whitney

Mar 27, 2006, 01:27

A lot of rubbish has been written lately about “religious faith.” The fact is, there’s a force that’s more powerful than faith; the power of denial. America is drowning in denial. Most people would rather keep their heads stuck in the sand than face the disaster right before their eyes.

Congress just voted to spend another $92 billion for a war that no one supports and, yet, there's not a whimper of protest from the American people. They’ve raised the national debt to a whopping $9 trillion, every penny of which will be paid off by our children and their children’s children. Still, not a peep from the public.

Do the American people care? No way; a few soothing bromides from our lobotomized commander in chief and they’re lulled back to sleep.

It’s called “denial.” D-E-N-I-A-L.

Maybe you’ve already figured out that the Bush administration is fudging the numbers to make them look good? You’re right. Walter J. Williams (Dartmouth, BA in Economics and an MBA; economic consultant for Fortune 500 companies) has compiled the data and found that “real unemployment is running at 12 percent, real CPI (Consumer Price Index) is running at 8 percent, and real GDP (Gross Domestic Product) is in contraction. The country is already in a recession and headed for much worse.

No one believes this can go on forever. The administration has racked up another $3 trillion in debt in just five years, most of it going to Bush’s well-heeled friends via the “tax cuts.” At the same time, they’ve made the tax cuts “permanent,” knowing it will increase deficits by $400 to 500 billion per year. Deficit spending has become a permanent function of government.

The only thing that keeps interest rates from skyrocketing is the massive and “unsustainable” trade deficit.

When Reagan initiated his tax cuts the budget deficits soared to $200 billion the first year. That pushed interest rates up to 9.5 percent, killing the real estate market and causing the deepest recession since the Great Depression. Greenspan bailed him out by raising Social Security payments and then diverting that new revenue into the general fund. (SS has basically been a flat tax ever since) Our Social Security dollars now pay for roads, social programs, and endless war.

Last year the trade deficit climbed to a new high of $725 billion and is headed for $800 billion this year. Foreign countries now hold so much of our debt that Dubai can afford to buy our ports and China can snatch up Fannie Mae. China alone has an $800 billion account surplus; 75 percent of which is US debt and securities.

The Bush team likes this arrangement because it fits with their belief that national sovereignty should be transferred to the multinational corporations. As for the rest of us, who think that our ports, public lands, water, and resources should be the sovereign property of the people of the US, well, we’re out of luck, because $3 trillion worth of those assets now belong to China, Japan, and Saudi Arabia.

The other reason the American people haven’t felt the pinch of excessive government spending yet, is because of the unique relationship between the greenback and the sale of oil on the global market. Countries are forced to keep stockpiles of US currency in their central banks because oil is only denominated in dollars. This creates a de facto monopoly which ensures that dollars will continue to circulate on a massive scale whether the face value of the greenback goes up or down. (It is estimated that approximately $2.3 trillion are constantly circulated in oil transactions) It is the perfect confidence-game run by the hucksters at the Federal Reserve.

Most countries would prefer to purchase oil in their own currency (or in the more stable euro) rather than using the greenback which is buckling beneath $9 trillion of debt. Regrettably, any move to the euro is tantamount to a declaration of war against the United States and bound to invite “shock and awe-type” reprisals.

Washington will defend the “greenback-hegemony” with every weapon in its arsenal. That’s why Iran is in the crosshairs right now. Their threat to open an oil exchange (that would trade in euros) is a direct challenge to the dollar’s dominance as the world’s reserve currency. The Bush administration will never let that happen. An Iran Bourse would allow the central banks around the world to ship boatloads of unwanted dollars back to America and put the greenback into a death-spiral.

America’s economic future requires that we continue to control this “global extortion-racket” while producing humongous trade deficits which are mortgaging our country to foreign lenders.

There’s only one problem with this scheme; the American consumer is broke. Wages have been flat since the 1970s (in fact they have gone down by 2.3 percent since Bush took office) personal savings are at 0 percent, and housing prices (which generated $600 billion in additional spending last year) have flattened out. The American consumer represents 70 percent of GDP and has also been the major engine for growth in the global economy. Unfortunately, he’s “tapped out,” overextended and penniless.

That explains why so many corporations are packing up and headed for more promising markets in Southeast Asia. Hell, the Bush administration has even created tax incentives for them to leave.

The corporate exodus from America is not simply about high paying, high tech jobs leaving the country. It is also about the massive flight of capital and the destruction of the manufacturing sector. Right now, the only thing that keeps the US on its precipice is the teetering housing market which is headed for the dumpster. When the bubble bursts, we’ll see why Bush devoted so much time to building his police state apparatus.

Under Bush, we’ve seen a shocking acceleration of globalization. The major corporations have already loaded the boats, shifted the jobs, and drained every farthing from the public till. The Federal Reserve has cobbled together a dollar-system that allows it to print worthless script in exchange for the wealth and resources of foreign nations. It’s a plan that addresses the needs of America’s plutocrats and bigwigs, but leaves 99 percent of the people to fend for themselves while facing increasing scarcity and hardship.

This is why we fight; to defend this system of corporate larceny and extortion. This is the “noble cause” for which Casey Sheehan and thousands of others have given their lives.

Isn’t it time we pulled our heads out of the sand?

Anonymous said...

They can ride those puppies all the way back up to 18% for all I care.

In fact, I wish they would. It's AWESOME for savers.

18% on a CD, who could ask for anything more?

Anonymous said...

Anonymous said...

"Denial, it’s not just a river in Egypt

"By Mike Whitney

"Mar 27, 2006, 01:27

"A lot of rubbish has been written lately about 'religious faith.' The fact is, there’s a force that’s more powerful than faith; the power of denial. America is drowning in denial. Most people would rather keep their heads stuck in the sand than face the disaster right before their eyes.

"Congress just voted to spend another $92 billion for a war that no one supports and, yet, there's not a whimper of protest from the American people. They’ve raised the national debt to a whopping $9 trillion, every penny of which will be paid off by our children and their children’s children. Still, not a peep from the public.

"Do the American people care? No way; a few soothing bromides from our lobotomized commander in chief and they’re lulled back to sleep.

"It’s called “denial.” D-E-N-I-A-L.

"Maybe you’ve already figured out that the Bush administration is fudging the numbers to make them look good? You’re right. Walter J. Williams (Dartmouth, BA in Economics and an MBA; economic consultant for Fortune 500 companies) has compiled the data and found that “real unemployment is running at 12 percent, real CPI (Consumer Price Index) is running at 8 percent, and real GDP (Gross Domestic Product) is in contraction. The country is already in a recession and headed for much worse.

"No one believes this can go on forever. The administration has racked up another $3 trillion in debt in just five years, most of it going to Bush’s well-heeled friends via the “tax cuts.” At the same time, they’ve made the tax cuts “permanent,” knowing it will increase deficits by $400 to 500 billion per year. Deficit spending has become a permanent function of government.

"The only thing that keeps interest rates from skyrocketing is the massive and “unsustainable” trade deficit.

"When Reagan initiated his tax cuts the budget deficits soared to $200 billion the first year. That pushed interest rates up to 9.5 percent, killing the real estate market and causing the deepest recession since the Great Depression. Greenspan bailed him out by raising Social Security payments and then diverting that new revenue into the general fund. (SS has basically been a flat tax ever since) Our Social Security dollars now pay for roads, social programs, and endless war.

"Last year the trade deficit climbed to a new high of $725 billion and is headed for $800 billion this year. Foreign countries now hold so much of our debt that Dubai can afford to buy our ports and China can snatch up Fannie Mae. China alone has an $800 billion account surplus; 75 percent of which is US debt and securities.

"The Bush team likes this arrangement because it fits with their belief that national sovereignty should be transferred to the multinational corporations. As for the rest of us, who think that our ports, public lands, water, and resources should be the sovereign property of the people of the US, well, we’re out of luck, because $3 trillion worth of those assets now belong to China, Japan, and Saudi Arabia.

"The other reason the American people haven’t felt the pinch of excessive government spending yet, is because of the unique relationship between the greenback and the sale of oil on the global market. Countries are forced to keep stockpiles of US currency in their central banks because oil is only denominated in dollars. This creates a de facto monopoly which ensures that dollars will continue to circulate on a massive scale whether the face value of the greenback goes up or down. (It is estimated that approximately $2.3 trillion are constantly circulated in oil transactions) It is the perfect confidence-game run by the hucksters at the Federal Reserve.

"Most countries would prefer to purchase oil in their own currency (or in the more stable euro) rather than using the greenback which is buckling beneath $9 trillion of debt. Regrettably, any move to the euro is tantamount to a declaration of war against the United States and bound to invite “shock and awe-type” reprisals.

"Washington will defend the “greenback-hegemony” with every weapon in its arsenal. That’s why Iran is in the crosshairs right now. Their threat to open an oil exchange (that would trade in euros) is a direct challenge to the dollar’s dominance as the world’s reserve currency. The Bush administration will never let that happen. An Iran Bourse would allow the central banks around the world to ship boatloads of unwanted dollars back to America and put the greenback into a death-spiral.

"America’s economic future requires that we continue to control this 'global extortion-racket' while producing humongous trade deficits which are mortgaging our country to foreign lenders.

"There’s only one problem with this scheme; the American consumer is broke. Wages have been flat since the 1970s (in fact they have gone down by 2.3 percent since Bush took office) personal savings are at 0 percent, and housing prices (which generated $600 billion in additional spending last year) have flattened out. The American consumer represents 70 percent of GDP and has also been the major engine for growth in the global economy. Unfortunately, he’s “tapped out,” overextended and penniless.

"That explains why so many corporations are packing up and headed for more promising markets in Southeast Asia. Hell, the Bush administration has even created tax incentives for them to leave.

"The corporate exodus from America is not simply about high paying, high tech jobs leaving the country. It is also about the massive flight of capital and the destruction of the manufacturing sector. Right now, the only thing that keeps the US on its precipice is the teetering housing market which is headed for the dumpster. When the bubble bursts, we’ll see why Bush devoted so much time to building his police state apparatus.

"Under Bush, we’ve seen a shocking acceleration of globalization. The major corporations have already loaded the boats, shifted the jobs, and drained every farthing from the public till. The Federal Reserve has cobbled together a dollar-system that allows it to print worthless script in exchange for the wealth and resources of foreign nations. It’s a plan that addresses the needs of America’s plutocrats and bigwigs, but leaves 99 percent of the people to fend for themselves while facing increasing scarcity and hardship.

"This is why we fight; to defend this system of corporate larceny and extortion. This is the “noble cause” for which Casey Sheehan and thousands of others have given their lives.

"Isn’t it time we pulled our heads out of the sand?"


Maybe you should pull your head out of something else first. "The Bush team?" "Shock and awe-type reprisals?" What asylum did you escape? Reading a book doesn't make you an economist or an expert in international politics, and your comments concerning Bush certainly don't represent facts. They represent the imaginings of paranoid schizophrenics.

Were you by any chance marching in Seatle a year or two ago, trowing bricks through store front windows, and screaming about the World Bank?

Cooking the books has been going on in Washington for years. Clinton, who gave us NAFTA, found new ways of defining inflation. Did you complain then? As for Reagan, his tax cuts boosted the amount of tax revenues through the roof, and were simply a repeat of those instituted by John Kennedy. They didn't destroy our economy; they saved it. Carter, the dreariest and most inept president in my lifetime, had pretty much run it into the gutter.

The dot-com bubble was Bill Clinton's crowning achievement, at least according to him and Al Gore. Did you complain about that? When Carter had us lining up for gasoline did you complain?

The government of the U.S. isn't a monarchy. Those monsters you rail against were elected by Americans and can be as easily turned out of office. We give them their power, so if anyone is to blame, we are.

Congress votes to give more money to the war because Congress got us into war in the first place, and cannot now suddenly cut off funds. Talk about a disaster. Do you remember what happened when we pulled out of Vietnam and Cambodia? Do you want that to happen again?

Iran is in the crosshairs right now because Iran is a vicious fundamentalist Muslim country trying to acquire nuclear weapons which it most certainly will use against Israel. It is also a major player in the Iraq insurgency. Iran has wanted to control Iraq for many years. The current president of Iran is one of the kidnappers who held Americans hostage during the Carter administration. Should we ignore him and his bomb project?

The movie "Chicken Little" is something you might want to check out. So is a prescription for Prozac. Don't look under the bed, because you might find a Leprechaun. Hang crosses on your windows to keep vampires at bay. Bury all your money in the back yard. Keep changing your IP Address.

Don't even THINK about flying saucers, because extraterrestrials CAN read your mind.

Kleenex boxes make excellent footwear.

Yes, people ARE whispering behind your back.

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