Obviously we're going up another 1/4 point. But more importantly, he'll give some ambiguous language that leads folks to believe he's more likely than not to raise again at the next meeting. Here's his choice:
Keep on raising:
Housing prices plummet (faster)
Trade imbalance improves
Economy falters before a Republican election
Dollar stabilizes
Stock market drops due to tight credit
Gold stabilizes, possibly falls
Stop raising:
Housing prices plummet (slower)
Dollar tanks bad, really, really bad
Trade imbalance improves
Economy slows because of inflation
Inflation roars
Stock market drops due to inflation and dollar
Gold soars
11 comments:
If he stops raising the Japanese and Chinese will pull their money out, raising interest rates anyways, better to keep raising and kill the housing market.
Ben has no control over long term rates, only short term.
I saw a statistic once that if Japan and China sold all of their treasuries
rates would be 5 points higher. Yes rates would be about 12% if they sold all of their treasuries.
Yeah, 600-700 basis points is a good stop, strengthens the dollar and strangles the inflationary pressure on the economy.
He is going to say and I quote:
Tha,Tha,Tha, Thats all folks!
Come on Ben. Shock us all and raise it 50 basis points.
So, is the government lying or not?
http://yahoo.reuters.com/investing/FinanceArticle.aspx?type=economicNews&storyID=urn:newsml:reuters.com:20060510:MTFH11853_2006-05-10_00-01-38_N09355731&rpc=44
WASHINGTON, May 9 (Reuters) - Aggressive foreign diversification away from U.S. Treasury securities is "fairly implausible," although foreign holdings of Treasuries could shift over time, a senior Treasury official said on Tuesday.
"Foreign holdings of U.S. Treasuries are very substantial and foreign demands for Treasuries could evolve over time," Treasury Undersecretary Randal Quarles said in remarks prepared for delivery to a New York University group.
....
Rising mortgage interest rates for home owners who have adjustable rate mortgages are also unlikely to cause much of a dent to the broader economy, Quarles said. The repricing of adjustable rate mortgages over 2006 and 2007 is likely to raise mortgage payments by $20 billion, he said.
"While that is certainly a large number, it represents only a small hit to aggregate personal income," he said.
---------------------------
Does anybody have accurate numbers on the ARM repricings?
Is $20 billion it, or is it much larger?
Remember this guy is a Treasury official (i.e. Bushite crony, these days), not an independent Fed or regulator.
Ben will say...
Yakity blank flim flam boo, my name is Ben and my game is woo. Round and round my wanker goes, dont turn your back or touch your toes. 1/4 point+
It appears the FED is “speaking softly and carrying a big stick”. In other words, the FED wants to appear dovish, yet act hawkish.
JMO, they are not about to stop because of all the economic imbalances in the economy. Besides they know the inflation wave is beyond the horizon.
When you put it like that, his choice is obvious. He will keep on raising.
Skyrocketing gold prices put more egg on his face than anything else. He will move to stop them.
Anonymous said...
Ben will say...
Yakity blank flim flam boo, my name is Ben and my game is woo. Round and round my wanker goes, dont turn your back or touch your toes. 1/4 point+
Wednesday, May 10, 2006 2:46:06 AM
I TOLD YOU SO
And then the NAZ dropped 3% in 2 days. Thx Helicopter Ben.
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