April 20, 2007

For those thinking Bernanke & the Fed won't let housing crash, guess you don't remember the NASDAQ crash or WIN either huh?

With the dollar tanking, inflation will rise, giving Bernanke two reasons to make the next move UP, not down. And yup, you know what that'll do to the markets and housing. So be it.


It is NOT the Fed's role to protect asset prices. It's the Fed's role to fight against inflation. Even the incompetent Alan Greenspan, Mr. Bubble himself, telegraphed how this latest bubble would end, and I think with the Alt-A and Subprime meltdowns we're now at the "investor caution" stage:

Rising house and stock prices have made many people feel more wealthy and have helped to support consumer spending, a key ingredient of the economy's good health.

Greenspan, however, said people shouldn't count on that paper wealth, which can evaporate if economic conditions deteriorate rapidly.

"What they perceive as newly abundant liquidity can readily disappear," he said. "Any onset of increased investor caution" could cause home and stock prices to drop, he noted.

A long spell of low interest rates and low risks for investors has especially encouraged investment in homes. Greenspan worried about what would happen if that climate were to change.

"History has not dealt kindly with the aftermath of protracted periods of low-risk premiums," he said.

And this on the Fed's conundrum to move up or down:

Notes from the Federal Reserve rate-setting committee’s late-March discussions, released last week, highlighted that inflation is its biggest concern and that it is leaning toward interest rate increases to curb it, but it may have other cards up its sleeve.

“The committee agreed that further policy firming might prove necessary to foster lower inflation, but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming.”

Those nebulous comments may dredge up uncomfortable memories of the tenure of Fed chairman Paul Volcker (1979 to 1987), when he chose to curb the nation’s stagflation—characterized by high rates of both inflation and unemployment—by limiting the growth of the money supply and allowing interest rates to rise. That caused a recession in the early 1980s and unemployment levels second only to those of the Great Depression.

29 comments:

borkafatty said...

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For some strange reason I feel like singing this morning, the sun is shining it is going to be low 70's today..let's do it.

Yes it is the middle of April so what, let us join hands HP'ers and sing that famous Christmas song from the late great Burl Ives Silver And Gold.....

Silver and gold, silver and gold
Ev'ryone wishes for silver and gold
How do you measure its worth?
Just by the pleasure it gives here on earth

Silver and gold, silver and gold
Mean so much more when I see
Silver and gold decorations
On ev'ry Christmas tree.

goog day all

BfAtz

Anonymous said...

But but but but: the markets love gentle Ben... Ben is their friend. When Ben speaks the market stabilizes and goes higher.

SPECTRE of Deflation said...

Any way you slice it, Americans were financialy better off in the late 70's early 80's. Their balance sheets were much stronger which helped to cushion a terrible bout of stagflation and recession.

This time around the cushion is gone. The majority are one paycheck from disaster. When consumers are unwilling or unable to take on more debt watch the deflation fly.

anonymous wimp said...

Bernake doesn't have the stones to do a Volker-style cure, even if it desperately needed it.
How do I know? I don't. Just a feeling I have watching him testify before congress.
Hopefully, I'm wrong, and if Volker-style strong medicine is needed, he would step up to the plate.
Time will tell.

nebulous mirror fogger; said...

I really do not think rates will go up. Too much foreign debt.

I call Fed Bank hold or lower.

Too late for housing anyway.

Hayley said...

Hey Have you guys noticed, last nights closing credits for the Daily Show included pictures of the US mint printing dollars.

There was also a segment on the falling dollar. (John informed his decked out british correspondent that he was getting paid in dollars and not Euros - pretty funny.)

I do believe we're becoming part of the Zeitgeist And Keith will probably not get the credit he deserves.... isn't that always the way.

concerned said...

He will not allow the dollar to crumble........forget it.

All those dreaming of riches with precious metals.....it ain't gonna happen.

He will have no choice but to save the dollar.....

Anonymous said...

Look Stocks Up over 100!!!!!
wow, what a depression!!!

Give it up losers, there is no bubble and housing never goes down!!!!!! Cry Babies Missed out!!!

HAHAHAHAHAHAAHHA!!

Anonymous said...

nasdaq was small change compared to housing. 70% of Americans are homeowners. less than 50% at the time were invested in stocks. Of those that were, the dollar amount per household was a fraction of what the dollar amount per household invested in a home is.

apples to oranges comparison.

Face it, the bailout is coming. Only question left is will it cost you a few hundred in taxes or a few thousand?

Anonymous said...

State and local governments rely on Real Estate taxes. Most governments at the state level are in deep fiscal trouble. If Real Estate prices are allowed to decine substantially, state pension funds, already grossly underfunded, and school districts will be deeply in the red ink. Ben has to come to the rescue of states before worrying about the dollar.

Anonymous said...

I have no idea if the Fed will raise or lower rates, but to say the Fed's role is to fight inflation is totally wrong. That might be their stated goal, but the Fed is the creator of inflation not the fighter of inflation.

Anonymous said...

There was also a segment on the falling dollar. (John informed his decked out british correspondent that he was getting paid in dollars and not Euros - pretty funny.)

I do believe we're becoming part of the Zeitgeist And Keith will probably not get the credit he deserves.... isn't that always the way.


Hmm but I thought all Americans were stupid and don't understand the nuances of exchange rates. Obviously if Daily Show is making jokes about it, the public knows about it.

SPECTRE of Deflation said...

The only thing holding a ceiling on yeild on the long bond is foreign buyers. Remove them or slow down their buying, and these ubsurdly low yeilds will fly higher. When this happens we get a dollar rally. Until then the dollar will continue to be trashed by all concerned.

As an aside, we might also consider credit card debt and the banks exposed to the most risk from credit card default as the next shoe to drop? Just a thought.

For Gold and Silver Bugs:
Why is it that you think your PM won't be confiscated for the good of the nation (banks)? It's already happened once, so why put your trust in something the govt. can easily take away?

stuckinthecity said...

concerned said...
He will not allow the dollar to crumble........forget it.

All those dreaming of riches with precious metals.....it ain't gonna happen.

He will have no choice but to save the dollar.....

April 20, 2007 1:46 PM
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You are wrong. The Fed has been chipping away at the dollar since it started in 1913.

The only way to save the dollar is to raise rates. The Fed can't/won't do that for another 5+ years before the ARM problems go away.

To fix the ARM problem, the Fed will have to print more FRNs to bail out the gamblers. That will drop the dollar even more. That will cause Europe, Iran, China et al to finally give up on the dollar.

Good night.

Anonymous said...

For Gold and Silver Bugs:
Why is it that you think your PM won't be confiscated for the good of the nation (banks)? It's already happened once, so why put your trust in something the govt. can easily take away?


The sheeple are not in PM. By the time the sheeple want in gold, it will be over $10K per oz. Todays gold bugs are united by the internet and will form a powerful political force the likes of which the Fed can't even comprehend. A few years ago, Greenspan was shocked that GATA discovered the IMF's gold swap scam and exposed it for the world to see. The mass media kept silent on the truth; but the GOLD BUGS operate above the mass media.

In a nutshell, the goldbugs are becoming the new lords over a new class of debt slaves being formed from the destroyed American middle-class.

Physical Gold is for royalty and the upperclass; not for the common man. This is the harsh reality!

pffffft said...

For Gold and Silver Bugs:
Why is it that you think your PM won't be confiscated for the good of the nation (banks)? It's already happened once, so why put your trust in something the govt. can easily take away?

April 20, 2007 4:00 PM



yaaaa, the govt does such a good job of confiscating illegal stuff like weed, coke, guns from known criminals.

I'm not worried.

hp'ers are stupid said...

You are all WRONG again.
Here, read this:

http://tinyurl.com/27ygvj

Your fellow conspiracy theorist, Mike Whitney, just about has it nailed right. Only sadly he concludes with Bush bashing and black helicopters and stuff.

Anyway, the Fed will lower interest rates. You forget, all the crap from China is discretionary.

sinis said...

nasdaq was small change compared to housing. 70% of Americans are homeowners. less than 50% at the time were invested in stocks. Of those that were, the dollar amount per household was a fraction of what the dollar amount per household invested in a home is.

apples to oranges comparison.

Face it, the bailout is coming. Only question left is will it cost you a few hundred in taxes or a few thousand?

April 20, 2007 2:48 PM



There will be no bailout. The guberment does not/ cannot print enough money to stem the tide.

Anyone else see the reports that indicate that several states are showing losses in sales tax revenue? Hmmmm, wonder what that means - hint: no one is buying shit anymore. Also, another report indicated that expatriated dollars to mexico has DROPPED significantly. Hmmmm wonder what that means - hint: mexicans are losing their jobs or cannot make ends meet and are not sending any extra back home.

Yea, things are looking great...

Anonymous said...

With a very large holding of gold, I'm in the planning process of moving my gold horde overseas. thinking about swiss safety deposit boxes.

Anonymous said...

Anonymous said...

With a very large holding of gold, I'm in the planning process of moving my gold horde overseas. thinking about swiss safety deposit boxes.


Is everyone on HP this paranoid? Christ almighty take a xanax dude, you certainly need it.

Barbara said...

I don't usually comment but I do remember WIN (Whip Inflation Now). Like most presidential ideas, it didn't do much.

Barbara

Anonymous said...

Anyone else see the reports that indicate that several states are showing losses in sales tax revenue? Hmmmm, wonder what that means - hint: no one is buying shit anymore.

Here is what this report says. Not exactly a depression in the making.

• Weakness in sales taxes left 14 states with revenues below forecast, and New Jersey and Florida both reported sharp drops.
• Overall revenue collections were above forecast in 15 states, on target in 23 states and below target in 11 states. (Florida did not provide information.)
• Personal income tax remained strong, with 32 of the 41 states with broad-based personal income taxes either above or on target.
• Business taxes were on target or above in 38 states.

Hayley said...

Hey just for the record, the pension program in my state (who does not use astrologers as investment advisors aka Orange County) is OVER funded. Of course the MSM never mentions this, it's too much fun public baiting and letting everyone "feel the hate."

FlyingMonkeyWarrior said...

Anyone else see the reports that indicate that several states are showing losses in sales tax revenue?
________
Yep, Florida budget increases 80% YOY under Jeb Bush and shows a Tax Shortfall on the books for 2007. Who knew.
Kicker, tax cuts are under discussion in the among the law makers. Doh.

Dr. Pangloss said...

Multi-trillion-dollar bailout ahead, friends, including eventually Social Security (right!), Medicare, gov't trusts (right, again!) funds, pensions, banks, state and local gov't, and who knows who or what else.

The federal gov't is already de facto bankrupt but it will take years for the bills to exceed the Fed's ability to paper over losses.

Gold will not be enough; gov't can confiscate your stash at home on behalf of the bankers who will buy with taxpayer cash at dimes on the dollar; to save oneself, one will have to have an exit strategy and follow Keith's lead and depart the homeland for far-flung imperial or commonwealth environs where the currencies are denominated largely in terms of the valuable resources the country holds, i.e., commodity currencies.

At some point the US gov't will simply restate or revalue the nominal value of the currency. Who knows what it will be: 5:1, 10:1, 50:1, or 100:1 to today's value.

The Dow could hit 129,000 with a 90% devaluation but the purchasing power of the Dow will be no less worthless than the currency in which the book entry stock values are denominated.

Sell you house, stocks, US paper, etc. Get out while a US$1 is still 2 equally worthless brit pounds, not 10; while a US$1 is still AUS$1.9; a US$1 is still CDN$1; US$1 is still EU$0.74; and US$1 is still SWF$1.21.

Face it, friends, the empire is lost. Do what you can; what you must; but, please, get out NOW!!!!

SPECTRE of Deflation said...

Anonymous said...
For Gold and Silver Bugs:
Why is it that you think your PM won't be confiscated for the good of the nation (banks)? It's already happened once, so why put your trust in something the govt. can easily take away?

"The sheeple are not in PM. By the time the sheeple want in gold, it will be over $10K per oz. Todays gold bugs are united by the internet and will form a powerful political force the likes of which the Fed can't even comprehend. A few years ago, Greenspan was shocked that GATA discovered the IMF's gold swap scam and exposed it for the world to see. The mass media kept silent on the truth; but the GOLD BUGS operate above the mass media."

"In a nutshell, the goldbugs are becoming the new lords over a new class of debt slaves being formed from the destroyed American middle-class."

"Physical Gold is for royalty and the upperclass; not for the common man. This is the harsh reality!"

You didn't answer my question. I don't care who owns physical Gold or Silver. What keeps the Govt. from confiscating the PM's again, as they have done before. You have history to teach you a lesson, yet I get nonsense or babbling about this or that.

booyah said...

Retail sales are suffering because so many people are spending most of their money on taxes and housing. The retail numbers only look decent because gas prices have incrased by 50% since January.

SPECTRE of Deflation said...

"booyah said...
Retail sales are suffering because so many people are spending most of their money on taxes and housing. The retail numbers only look decent because gas prices have incrased by 50% since January."

Retail sales is holding up because of increasing revolving credit as opposed to the MEW approach.

It's why I think we need to look at the Banks with as much exposure as possible to their portfolios from credit cards. Defaults will be even worse with credit cards because people will default thinking they keep the house, if they really want it, while the bankruptcy laws were changed to screw the little guy. Means testing and other nasty things waiting for people who think they can bale on revolving debt.

Anonymous said...

Anyway, the Fed will lower interest rates. You forget, all the crap from China is discretionary.

Well, not ALL of it...

Shoes, clothes, tools, you get the picture...

You can go back to sleep now.