Nice to see the Fed "on message". Not.
Reminds me of Katrina days - everyone wants to trust that our government is made up of competent, brilliant folks. When in the end, it's really mainly people who can't cut it in the private sector who end up in government.
Here's the keystone cops at the Fed thinking out loud this week on what to do next. They have no idea is the answer. Housing is crashing, commodities have crashed, REIC jobs are going away in the millions, we've lost our manufacturing base, the savings rate is negative, government spending is out of control, we're $40 Trillion in the hole, the housing ATM is closed, consumers are taking on even more credit card debt to fuel spending, and the election is paralyzing them.
And in the end, I don't think these guys realize the full effects of the end of the housing ponzi scheme. Or if they do they don't want to talk about it in public.
Fed officials air yin, yang on inflation outlook Friday October
U.S. Federal Reserve President William Poole said on Thursday he sees risks to U.S. growth and would back a rate cut if the economy stumbled, but another Fed official offered a divergent view, sending the dollar seesawing.
"If we came to the conclusion that the economy was really running in the direction that the bond market is currently predicting, then it seems to me that considering rate cuts is going to be highly appropriate," St Louis President Poole, historically a Fed hawk, told Reuters in an interview.
Minutes later, Michael Moskow, president of the Chicago Fed, gave a virtual mirror image of Poole's assessment.
"The risk of inflation remaining too high is greater than the risk of growth being too low. Thus, some additional firming of policy may yet be necessary," Moskow told a group of real estate professionals in Chicago.
Moskow said he expected core inflation, stripped of food and energy prices, to fall in the coming "months and years," but he highlighted substantial risks to the upside in the meantime.
Reflecting the view of several other Fed officials, Moskow downplayed any possible contagion to the broader economy from the current downturn in residential housing.
Varying views on the housing segment are one of the biggest talking points between those who see the Fed holding rates steady for some time, and those who anticipate rate cuts early in the new year in the face of rapidly slowing growth.
Poole warned there could be "more distress to come" if house prices start to fall in earnest.
"It would be a mistake to say that couldn't be an issue ahead of us."
October 13, 2006
Inflation deflation rate cuts rate hikes tomato tomato update
Subscribe to:
Post Comments (Atom)
15 comments:
here's some comments from bob prechter I found. He's been wrong more than right, but interesting on deflation being a result of the collapse of the credit bubble:
JIM: If you were to make your case for deflation right now, what would be the key factors supporting that view?
BOB: The credit bubble: the fact that we do not have currency inflation as much as we have credit inflation. And credit bubbles have always imploded. The amount of dollars out there that are greenbacks – actual cash – is miniscule compared to the dollar value of credit instruments. So in my view the Fed is utterly powerless to prevent the ultimate deflation of the credit bubble. And some people say, “Well, they can print money.” Fine, that would just make the credit bubble collapse faster as soon as bond holders realize that’s what they were doing. There’s no way out of it. So that’s the argument.
It seems to me you’re also implying, “what are the signs?” And we don’t have any yet, because we haven’t turned down in the 5th wave in the stock market. I think we might have peaked in oil – I put out a report on oil in July; we may have seen the tops in gold and silver. I think I called silver very well; gold went way beyond where I thought it would, but now it’s back into a reasonable area. So I think there are signs. Just like in the housing area, there was a tremendous speculation all supported by credit. Credit is behind all of the asset bubbles – not cash, as say in Weimar Germany in 1923; that was a different situation. It’s all IOUs; somebody’s collecting interest on that and someone on the other end is promising to pay. And when all of that collapses I think we’ll see deflation. [11:44]
http://www.financialsense.com/transcriptions/2006/1007prechter.html
"You know, I -- gasoline prices are down, and that's good news. (Applause.) Yes. I think everybody in America ought to be applauding. (Laughter.) It's like -- if you're driving a truck for a living, it helps you. If you're trying to put food on the table and you got to drive to work, it helps you. If you're a small business owner, it means you've got more capital to invest when the price of gasoline goes down."
Yeppers looks like bush equates rising energy prices with inflation - whadda ya think Keefer?
Press Release Source: White House Press Office
Remarks by President Bush on Energy
Thursday October 12, 3:44 pm ET
WASHINGTON, Oct. 12 /PRNewswire/ -- The following is a transcript of remarks by President Bush on energy:
St. Louis Convention Center
St. Louis, Missouri
commodities have crashed…Ha Ha Ha. First copper became a “problem” and it was hit hard by selling in London causing a commodities sell off. Then we had round two with nickel. The solution there was to screw the longs out of their profits by changing the rules. Now it looks to me like these solutions only had a short term impact. Base metals are retracing their highs. Now lead is going nuts as is zinc and the base metal index. The oil markets are suspicious to say the least. To quote the Mogambo Guru: "and there is no doubt whatsoever in my Puny Mogambo Mind (PMM) that the recent surprising fall in the price of oil has nothing to do with the supply/demand dynamic, but about the desperation of massive governmental extortion and bribery, and that oil will soon rebound and keep going higher and higher for a long, long time."
So I am thinking that right after the elections may be a good time to trade some more dollars for a bit more Gold.
TOM,
YOU FORGOT WHEAT. LOOK AT WHEAT!
AND NO, YOU"VE MISSED THE BOTTOM.
ITS UP UP UP NOW. I WAZ ALL IN
ON WED.
AND KEITH, TO BE FAIR TO RICH, YOUR
ENDLESS ON AND ON ABOUT MUSLIMS IS
(1) TIRESOME (2) BORDERING ON RACISM.
WE ALL HAVE OUR HANGUPS, FOR SURE.
-MAHA
"Fine, that would just make the credit bubble collapse faster as soon as bond holders realize that’s what they were doing."
People/countries holding $US denominated bonds are going to find it a bit difficult to sell them and get out as you suggest. What are they going to replace them with? As long as the USD is the reserve currency, your scenario just can't work.
THEY ARE GOING TO REPLACE THEM WITH
GOLD. AND AS THE PANIC SETS IN, THEY
WILL SELL THEM CHEAPER AND CHEAPER,
SENDING GOLD TO THE MOON AND THE DOLLAR
TO THE TOILET. WATCH CHINA AND RUSSIA
FILL THEIR RESERVES!
MAYBE THEY WILL START TO PRINT SUPER
ABSORBANT, EXTRA SQUISHABLE DOLLARS
ON A ROLL.
-MAHA
"THEY ARE GOING TO REPLACE THEM WITH GOLD. "
Really? I don't think so. You can't change a pickle back into a cucumber, and there is no way the international monetary system can revert to use of non-fiat currencies. Hell, now even the Swiss Franc floats.
You doomsday types had better wake up to the reality of the current situation. The central bankers can and will create whatever liquidity they need, and send it to wherever it's needed.
Yes, I think gold will go up in value, but it may be outlawed as a result.
WELL, THERE IS A LOT OUT THERE BEING
REPORTED ABOUT CHINA AND RUSSIA SERIOUSLY
UPPING THEIR RESERVES. IF CHINA UPS RESERVES TO 10% GOLD, WHAT DOES THAT DO
TO THE USD? AND YEAH, THE SWISS WERE
STUPID TO SELL THEIR GOLD. NOW THEY
WILL BE POOR LIKE EVERYONE ELSE.
DOES THIS MEAN CURRENCIES ARE DEAD?
NO, OF COURSE NOT, WE WILL PROBABLY NEVER
SEE A GOLD STANDARD AGAIN. WILL WE HAVE
AT LEAST A 50% DEVALUATION OF USD? YEAH,
PROBABLY AT LEAST. WILL THE US GOV FIND
MY GOLD BURRIED IN THE HILLS? F-NO. WILL THERE BE A BLACK MARKET OF BARTER, GOLD
AND SIVLER IN THE US IN 5 YEARS. LIKELY
I THINK.
-MAHA
GOTTA LEARN TO INCUBATE CHICKEN EGGS TO GET MORE EGGS AND CHICKENS, AND HOPE THEY CAN BE PERSUADED TO EAT FLAVORED? GROUND UP LEAVES, AND LAWN CLIPPINGS
Commodities and Housing are crashing just like Stocks and Bonds did in 1987. It has happened this way about 5-7 years in to every long term bull market cycle (generational paper or hard assets cycles that last 15-20 years) since 1913 when the Fed was created. Housing will take longer to hit bottom because it is less liquid, but it will hit a bottom, then come back even stronger than before, just like Stocks and Bonds did after 1987. Prechter is way off. We won't have a deflationary cycle because our economy is not dependant on foreign private investment or exports so there is little danger of liquidity drying up, as happened in post 1929 US and post 1989 Japan. The Fed insures inflation. That is it's job: to manage a somewhat orderly devaluation of the dollar in order to stimulate economic growth. It has done so consistently since it was created, and will continue to do so as long as it exists. Holding US dollars is a sucker's bet, because it flys directly in the face of the goals of the organization that is in charge of the US dollar's monetary policy. Stocks and Bonds are having a mini flight to safety rally right now, just like Housing and Commodities had from 1987-1989, but it won't last. Buy Commodities now, wait for the Housing correction to unwind, then get back into that market. Buy Stocks and Bonds again when the next long term bull market for those paper assets starts, sometime around 2015-2020.
Sorry Maha, but telling a young person to work in the regular sciences instead of attending medical school, given an MD/PhD scholarship, is irresponsible given the grant and funding situation in the sciences.
And don't play that "I'm Nikola Tesla" bravado routine because a lot of engineers and others have seen layoffs at Bell, DuPont, Watson, and a slew of other so-called stable shops that have sent high level work off to Asia and eastern Europe. Apparently, given your cult of personality, you don't give a fuck about others in the sciences. In ten to twenty years, there will no more research done in America, only "development consulting".
ANON,
ALL I WAS SAYING IS, BETTER TO BE
POOR THAN A WHORE. I GUESS YOU
DISAGREE.
-MAHA
"ALL I WAS SAYING IS, BETTER TO BE
POOR THAN A WHORE."
What about the concept of the "out" card?
A normal person in the sciences gets a PhD, struggles with a couple of postdocs and then perhaps gets a temporary job at a place like Rockefeller, hoping to land tenure there or someplace else. Well.. what happens when that grant is cancelled or not renewed?
Now, with an MD or MD/PhD, the same scenario holds true, however, when the politics of academia/grant machine chews one out, that person can still moonlight at a clinic at $75/hr and conduct research on the side, in either a paid or unpaid for capacity. I know researchers who live like that, part-clinician/part-bench work pro bono. Isn't that worth something? Or is your view of a science career that of a purist like Paul Erdos, who lived out of two suitcases and squated in everyone else's household?
the Fed claims to be an inflation fighter but if you really want to know what keeps them up at night, it is deflation not inflation. But, worse still, good old fashioned Bee-Gees and Donna Summer era (man was she hot) stagflation is what puts their tits in a real wringer. that's what causes them to sing falsetto ala Andy Gibb.
:Donna Summer era (man was she hot)
Dude, Donna Summer, a fellow Bostonian, was one of the greatest dance/disco divas of all time, bar none.
And I don't care if one's a fan of Diana Ross, Whitney Houston, Shakira, or Celine Dion but this lady had the greatest voice and talent of them all.
Post a Comment