When will Bernanke and the Fed panic and cut the Fed funds rate?
A) By next week
B) September
C) October - December
D) Not gonna cut until next year
E) Next move will be a rate hike
Bonus Question: Inflation, Stagflation, Deflation, Reflation or Desperation?
47 comments:
They will cut them in September is my guess. 50bp.
I'll say October-December, and I'll go with stagflation.
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approach old fashioned clothes wringer - check
insert nipple of tit (Chair's option on left or right) - check
take deep breath - check
give crank firm, quick rotation - check
after regaining composure, decide when to unwind position.
when you're up, and when you're down you're down and when you're only half way up you're neither up nor down!
honestly, I don't know. my gut feeling is that the FED is having a hard time targeting those people who would actually spend the money rather than store it in a CD or savings account-- i.e. the elite who know how to capture big bucks!
the Bernake helicopter has to worry about distribution as much as throwing around cash.
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November, right before T'giving.
Flagellation.
September
first!
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All of the above???
They will try to hold off until the 18 Sept meeting, but if things get tough they might do a 1/4 cut to sooth the savage beasts. Then either take another 1/4 to 1/2 at the Sep meeting. They probably would prefer 3 1/4 cuts for the entire year but if the foreclosure tsunami that is projected to hit this fall is as large as predicted they may have to do a hell of a lot more than cut the fed funds rate. Look for special laws that re-write mortgage contracts on more sane terms that will avoid carnage on both sides of the table. Banks and investors are just going to have to accept lower more STABLE returns on the loans/MBSs and just sue the rating agencies and investment banks for the difference. Banks are not meant to me residential RE management companies. The devastation to consumer consumption by permitting massive foreclosures will derail the global economy, so banks are just going to have to curb their greed. They knew the loans were not going to get paid when they underwrote/originated the loans so why cry now? Its called justice and taking responsibility for the quick buck you chumped off of society by creating this madness in the first place.
Has to be a rate hike. At current rates it's not worth leaving your money in a bank that may fail. If you've got a mill in the bank and drawing a lousy 5%, it's safer to put it in your pillow for a year. The loss will only be 50k for the piece of mind. I'm already moving blocks of money away from my bank accounts. I am surely not the only person doing this.
I'm out till short term cd's hit 8%
They'll cut rates and the market will dump.
D) Not gonna cut until next year
He's getting a lot of pressure for a cut from the politicians now. Let's see if he has any stones.
It's starting to look like the fed has been bought and paid for by Wall Street. Ben will cut rates when they tell him to. I think we're in for a long slow slide down, like the one Japan had, unless something dramatic happens.
I am going to go optimistic on this one and guess next week for the rate cut. I have a difficult time seeing the treasury rates recover like they cratered, though. (that's a way of saying that realistically I think it'll be done on Thursday of this week)
We really are at the point where it has hit the fan. It feels like we are on a spinning top that is beginning to wobble. Each wobble becomes more pronounced with each rotation. Cash or gold, cash or gold?!? My heart wants to say inflation, but my brain says deflation.
september, 25-50 bps
deflation scare later this year early '08. Helicopters fly in Q1-Q2 '08 to unprecedented degree and stagflation ensues with commodities and asian securities flying while us securities stagnate.
They SHOULD INCREASE but we know they will decrease next week.
Its deflation.
All the money created was out of debt. Its just money disappearing faster than they can print! All that money leveraged 500 to 1 in these busted hedge funds is going poof! All the ghost homes...
Its amazing. I open up the local paper and a developer is planning to build a 1500 home development up the street. I drive down another road and there is a sign for a new centex development in 2008. These HBs are not stopping or changing their plans in anyway! Its like they are pretending everything is normal.
Only problem is I don't see where people are going to get the money to buy these things.
Yeah, the big crash is here! Blood in the streets, run, run!
Here is what really happened to Keith and his legion of HP gloomies:
http://tinyurl.com/ynl5aq
Paulson and the Fed are going to take care of this mess. 2008 is an election year. Do you think either party wants the headlines filled with gloom and doom during the campaigns? For proof just look at how Chucky Schumer and Fathead Dodd called in all their favors to get some relief for their friends in the banking industry. Good ol' W won't let Freddie and Fannie buy CDO toilet paper, but he just winks when the Fed loads up on that trash at its discount window.
Sorry boys, but no crash this year, and probably none next year either.
They wont cut until they finish mastering the next bubble, what will it be? Thats where the cash will go. No cut till next bubble planned.
I think we will see a rate cut soon probably at the September meeting. This one will probably be a quarter point because anymore than that could cause panic selling. Somebody asked me Thursday during the sell off why doesn't the FED just lower rates. My answer was that would be like throwing gasoline on a forest fire.
I think we could have a brief inflationary period but in reality Euroland is worse off than us and so are the Japanese. China has money but her consumer economy ain't squat and nobody will be buying their crap anymore. So if everyone is going down the Dollar should do relatively well.
The real question is recession, Recession, depression, DEPRESSION.
The war on the middle class is going quite well thanks Wduh.
Can he cut is a big question with the Septmeber & October readings on inflation about to disappear from a year ago. -.5 & -.4 respectively, so if he cuts now inflation will rise sharply at the end of the year and the Fed will lose all credibility. He has to know this.
http://themessthatgreenspanmade.blogspot.com/2007/08/ben-if-youre-going-to-cut-rates.html
Ben will likely placate to political pressures and do some rate cuts. But that will only delay the inevitable. They won't cut rates to the levels seen after 9/11. (1%) That would decimate the dollar which is already being hammered. A small token rate cut will do nothing for those whose ARMs are resetting.
The housing tsunami will continue to unravel in the coming years. The government will of course try to stem losses. But in the end, things will find equilibrium. Just a question of 'when'.
But as another poster indicated, cutting rates too far will cause individuals to move money out of savings accounts and CDs in favor of things like equities. Or gold. And that would exacerbate the problem for the banks.
Its a no win scenario for the Fed. Its all damage control now.
the dollar has to blow up, before the new currency (the amero)to work. the zionist do not care about the u.s. econ. they just want to control the population. no air travelling without being screwed with. u.s. roads to be sold to private corp. with very heavy tolls. peak oil. it will be just like mexico, a sixpack of beer , some refried beans, and tv. just like being in heaven.
Fed set to cut the funds rate by 50 bps TOMORROW (Aug. 21) and an additional 50 bps for the effective discount rate at the same time or soon after.
The Taylor Rule, 2-yr. yield, real growth of monetary base, former yield curve inversion, and T-bill and commercial paper spread imply 4-4.25% NOW and 3.5% as soon as Q4 or early '08.
The collapse in T-bill yields and prospective funds rate decline imply a 30-35% decline in the SPX and imminent recession.
The VIX index is set to top 45-50, which implies a 30% increase in volatility from the recent high and 80% from current level.
Furthermore, technical patterns imply a collapse in the CRB index to the 200 area (and later the 180s), a plunge in the price of oil to the $30s-$40s, and unleaded gasoline falling eventually from $1.90s today to $1.50s in response to a global financial market panic and bear market and global recession or worse.
Bottom line: Get liquid NOW!!!
That looks like the DooDaa Parade!
1/4 point cut at the next fed meeting - the helicopter is in the air right now.
Maybe they are already "Frozen in Fear" ,the deepest form of panic.
Whenever it happens, it will be like me whizzing on a 5 alarm fire. The fat lady has sung, and cash is king baby!
insidetrader said...
Yeah, the big crash is here! Blood in the streets, run, run!
Here is what really happened to Keith and his legion of HP gloomies:
http://tinyurl.com/ynl5aq
Paulson and the Fed are going to take care of this mess. 2008 is an election year. Do you think either party wants the headlines filled with gloom and doom during the campaigns? For proof just look at how Chucky Schumer and Fathead Dodd called in all their favors to get some relief for their friends in the banking industry. Good ol' W won't let Freddie and Fannie buy CDO toilet paper, but he just winks when the Fed loads up on that trash at its discount window.
Sorry boys, but no crash this year, and probably none next year either.
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The Fed makes their money in crashes,squeezes,and volatility.When the opportunity arises to burn SuperTanker loads of cash out of the system ,and balance the devalution/revalution of the dollar the CBs do it.They care nothing about market segments,or regional economics.CBs(fed) remain viable as long as the dollar remains stable(relatively).
Housing is being "let Go",and is Crashing.128 lenders are gone,Hedgefunds have been given Scarlet Letters,nobody with sense wants to go near them.Gasoline in California has now reached down to 2.59 per gallon of gasoline(consumer is feeling the crunch),inventories of homes are in uncharted territory,sales are way off,GM has lost the top market spot,and on ,and on ,and on.
Yeah ,you're right,the sky is not falling,but nobody said it was .I do believe housing just crashed though.The Great Depression never happened either,just a bunch of people quiting their jobs,and took up base jumping in New York ;)
Anonymous Said:
"Look for special laws that re-write mortgage contracts on more sane terms that will avoid carnage on both sides of the table. Banks and investors are just going to have to accept lower more STABLE returns on the loans/MBSs and just sue the rating agencies and investment banks for the difference. Banks are not meant to me residential RE management companies."
I think that is the only sane way out of this. All the rate hikes will do is devalue the dollar further. The problem was and still is Bank greed. If they want to solve the problem, and not just bail out the big banks, this is the fix. Let the banks sort it out. If the investors are stupid enough to sue the banks for keeping people in their homes and allowing them to still make 6% vs. 10% of nothing, then so be it. Hey they were the greedy SOB's that thought a borrower that could not afford a down payment could eventually pay 10 to 13%, and then a prepayment penalty to trap them.
debt is wealth
"Cash or gold, cash or gold?!?"
Ask yourself this question, Would the PPT be even in existence let alone pumping the stock market with $billions if the dollar was backed by gold?
As for the deflation argument that you can't make people borrow and spend, give me a break. if the gov gave everyone a $500 tax rebate, are you saying people wouldn't go out straight away and spend it? $500 x 600 million people is is $300 billion. How much has the fed pumped into the stock market in the space of a week again?
Thing is you can have both asset deflation coupled with monetary inflation. An example of this is in Wiemar Germany a city block in Berlin would have set you back $500US or about 14oz of gold. To buy the exact same block with marks you'd have to hire something the size of the Titanic to carry all that cash as a loaf of bread cost something stupid like 37trillion marks.
Next rate cut will come sometime next week. Bernake will not only cut the Fed Fund rate, but all the other rates, including all ARM rates to one half of one percent and the long term thirty year adjustable rate to one percent. The dollar will completely tank and it will now cost $120 dollars to buy ice cream and it will be $50 dollars for a gallon of gas.
Millionaires will be able to afford a brand new Ford Escort. People interested in going to Paris, France will now opt for Paris, California - being that it does not make economical sense to pay airfare across the Atlantic for $50,000 dollars.
But alas, the Housing Bubble will be saved and more illegals will continue to come to America to become flippers.
They'll print money until the rollers on the presses fall off and then print some more.
Anyone who thinks deflation is only fooling themselves, you really think they'll be paying $500 pensions to boomers with $20k houses and 5cent loaves of bread?
Anonymous 10:10 said
"Banks and investors are just going to have to accept lower more STABLE returns on the loans/MBSs and just sue the rating agencies and investment banks for the difference. ..., so banks are just going to have to curb their greed."
Excuse ME! Have you not heard about contractual obligations? Dont you know our country is sue happy when contracts are not followed through. If anyone tries to modify these loans, there will be more lawsuits than you've ever seen or heard of in your life.
And what do you mean by "Banks and investors are just going to have to accept"- they DONT have to ACCEPT ANYTHING. The contracts have been signed, sealed and dated already. So if you want to change it, EVERYONE has to AGREE- IF they want to!
I suggest you take a business law 101 at your local college. So dont spill your uneducated theology to the rest of us!
All we can possibly know is that the fed will never do anything for the benefit of "regular" people, but it will do everything it can to save the asses of its friends and bosses in the wall street banks. Banks get bailouts, foreclosed people get IRS tax bills for debt forgiveness.
Rate cut next year, followed by Staginflation. Oil is a factor again, just like in the 70s. Now we have a larger turmoil in the Middle East, Chavez, stronger hurricanes, overpopulation in the US consuming more energy and social services, Peak Oil, and China and India sucking furiously all resources. To top all off, while the dollar is in the toilette, the Boomers will be hitting Medicare and selling stocks to fund retirement. Folks, the future can't get any darker for the US.
I don't believe the Fed controls interest rates. I think they just follow along with the market.
"
Sorry boys, but no crash this year, and probably none next year either."
Youre supposed to yell DOPES!!! after that.
You may very well be correct. That does not mean things wit hthe housing mareket are fixable, I dont believe they are. However, some of the symptoms and may be treated temporarily. Just like asprin will help with a gangrenous foot painwise, but the unfelt infection will continue killing the paitent.
Anonymous said...
Anonymous 10:10 said
"Banks and investors are just going to have to accept lower more STABLE returns on the loans/MBSs and just sue the rating agencies and investment banks for the difference. ..., so banks are just going to have to curb their greed."
Excuse ME! Have you not heard about contractual obligations? Dont you know our country is sue happy when contracts are not followed through. If anyone tries to modify these loans, there will be more lawsuits than you've ever seen or heard of in your life.
And what do you mean by "Banks and investors are just going to have to accept"- they DONT have to ACCEPT ANYTHING. The contracts have been signed, sealed and dated already. So if you want to change it, EVERYONE has to AGREE- IF they want to!
I suggest you take a business law 101 at your local college. So dont spill your uneducated theology to the rest of us!
August 21, 2007 4:15 AM
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Sorry no need to take your business law for chimps class I already have a law degree DUMB@$$.
Obviously you do not understand that desperate times call for desperate measures.
The issue is does private law contractual rights take priority over the need for a STABILIZATION of the economy. Its called FORCE MAJEURE. While I'm sure your business law for chimps class was very informative for chimps, I doubt this was discussed so here is the wikipedia article on the topic.
http://en.wikipedia.org/wiki/Force_majeure
Note the phrase in the standard clause "government sanction". Basically if the government declares something ILLEGAL, e.g. certain types of predatory loans, then they must all be rewritten on terms that are legal.
This will be done because all the pinheads of the universe, that would be you, do not realize that if unchecked HONORING these sorts of contracts are going to put the US and WORLD economies in the shitter and the very banks whose right you want to HONOR will go down with them.
So please get you head out of your @$$ and look around you and think without your f---ing greed based blinders and understand that there are greater more paramount issues at stake here.
Your the one that needs to stop spewing your uninformed business law for chimps greed biased BS.
If the goverment does not set long term rates then the cuts from the fed may just give the banks a better margin to borrow and stay in business. I dont see the savings being sent down to the debters.. I think the banks will use the $$s to keep afloat?
so banks are just going to have to curb their greed.
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My RE guy (a friend) tells me the loans he gives out are mroe tied to te 10 year than the Fed Rate. He has seen the 10 drop, but the rates he can give are steady. The banks need to profit, not the little guy.
Shakster said...
insidetrader said...
Yeah, the big crash is here! Blood in the streets, run, run!
Here is what really happened to Keith and his legion of HP gloomies:
http://tinyurl.com/ynl5aq
Paulson and the Fed are going to take care of this mess. 2008 is an election year. Do you think either party wants the headlines filled with gloom and doom during the campaigns? For proof just look at how Chucky Schumer and Fathead Dodd called in all their favors to get some relief for their friends in the banking industry. Good ol' W won't let Freddie and Fannie buy CDO toilet paper, but he just winks when the Fed loads up on that trash at its discount window.
Sorry boys, but no crash this year, and probably none next year either.
You seem to have a terrible problem in not grasping reality.
We are talking $545 TRILLION DOLLARS in derivatives which the FED can do jack shit about. They are a pimple on the ass of the credit market.
Anon 10:10 said:
The issue is does private law contractual rights take priority over the need for a STABILIZATION of the economy. Its called FORCE MAJEURE. While I'm sure your business law for chimps class was very informative for chimps, I doubt this was discussed so here is the wikipedia article on the topic.
http://en.wikipedia.org/wiki/Force_majeure
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Okay Mister or Miss Liar, I mean Mister or Miss Lawyer. Force Majeure does NOT apply here! How did you pass the Bar anywar? Or is your Bar credential from a Drinking Bar?
Force Majeure Does Not Apply! There is nothing in it that states "stabilization of the economy" idiot. And for what Illegal activities are talking about? Are you talking about the predatory flippers? Are you talking about people who lied on their loans, about illegal immigrants who worked at Taco Bell and bought ten houses baased upon their signatures on liar loans. Just exactly who are the predators here, besides the predators and the studpid RAT Lawyers who try to make up the law to suit their own personal needs.
I guess that would be you and all the loser flippers out there!
Dumb As#
One thing that has definately changed over the last two years is psychology. Pretty much everyone knows now that real estate does not always go up, and appreciation will not make up for taking on a huge mortgage. No matter how low the rates now go, it's already too late to change the psychology. By lowering the rates, and further discouraging people from saving their money, the economy will be much worse in the long run.
Bring back Paul Volcker! He wouldn't let this BS happen.
Rate cut next year, followed by Staginflation. Oil is a factor again, just like in the 70s. Now we have a larger turmoil in the Middle East, Chavez, stronger hurricanes, overpopulation in the US consuming more energy and social services, Peak Oil, and China and India sucking furiously all resources. To top all off, while the dollar is in the toilette, the Boomers will be hitting Medicare and selling stocks to fund retirement. Folks, the future can't get any darker for the US.
These are only a few of the things you see. It's what you don't see that can kill you.
For example, what if the overdue flu pandemic hits soon? Think Katrina everywhere.
After the initial agony, the Chinese will stand as the sole world superpower, having completed their resource grabs, and disproportionately "relieved" of their eldercare expenses.
Who wants to buy my broken 2007 plasma TV so I can bury my kids?
Anonymous said...
Anon 10:10 said:
The issue is does private law contractual rights take priority over the need for a STABILIZATION of the economy. Its called FORCE MAJEURE. While I'm sure your business law for chimps class was very informative for chimps, I doubt this was discussed so here is the wikipedia article on the topic.
http://en.wikipedia.org/wiki/Force_majeure
--------------------------
Okay Mister or Miss Liar, I mean Mister or Miss Lawyer. Force Majeure does NOT apply here! How did you pass the Bar anywar? Or is your Bar credential from a Drinking Bar?
Force Majeure Does Not Apply! There is nothing in it that states "stabilization of the economy" idiot. And for what Illegal activities are talking about? Are you talking about the predatory flippers? Are you talking about people who lied on their loans, about illegal immigrants who worked at Taco Bell and bought ten houses baased upon their signatures on liar loans. Just exactly who are the predators here, besides the predators and the studpid RAT Lawyers who try to make up the law to suit their own personal needs.
I guess that would be you and all the loser flippers out there!
Dumb As#
August 21, 2007 2:12 PM
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Hey Cheeseball, I already did the work for you "government sanction" means government by decree makes the contract illegal, e.g. contracts for the sale of organs are illegal and unenforceable (I wish they would have recinded the one where you donated your brain, but more for the sake of the guy that received it thay you). Any pre-existing contracts for the sale of organs immediately become illegal. Please hit the English as a second langauge books to improve your reading comprehension, and do not read things into MY words that are not there!!
FYI when I say I did the work for you I mean I gave you the legal analysis. FYI, conclusory proclamations that something does not apply is NOT legal analysis.
FYI - I think in addition to your own lack of command of the English language and stupidity, your negative bias against lawyers is jading your comments and life. Good luck with your obviously miserable life.
Stagflation
Ultimately the gov can steer the ship in any direction it wants, and inflation is the only politically easy way to defuse the debt bomb.
IMO fed is likely to cut 25 bp Sept 18. This is a freebie because FF is already trading at 5% anyway. Any cut that's bigger or sooner sends the wrong signal. I mean, all the passengers on the plane can look out the window and see the engines are on fire. 25 bp on Sept. 18 will feel like the pilot is still trying to fly the aircraft in for some kind of landing. 50 bp prior to Sept. 18 will feel like you see him setting the autopilot while strapping on a chute.
I'm looking for some major non-Fed action to try to reduce the bleeding. Conforming limit bump would help improve liquidity and is OK with me provided credit standards are still high. That will help creditworthy current owners refi and creditworthy borrowers buy RE if they want to. I expect some sort of giant patch for the rest. Gov will go to the lenders and triage the FBs - there are some who could and would keep servicing the debt despite being upside-down, if only they could get a fixed-rate mortgage at a rate that is not usurous. Some sort of loan guarantee program will be rolled out to make it happen. Gov doesn't even need to hold a gun to the lender's head, because they are already holding guns to their own heads and begging someone to stop them from pulling the trigger.
The observation about the likely effect of declining rates on bank deposits is one I had not considered but rings true. I was burned when Easy Al took rates down to 1%, heck even at 5% I'm losing money to inflation after taxes. For damned sure I'm not going to just lie back and take it again - I'll buy stocks, gold, even RE if I have to. So, like, yeah, cuts down to Japanese interest rates don't seem to be in the cards this time around.
Gov needs to do something to encourage savers, instead we will likely have a Democrat anxious to "soak the rich" with even higher taxes eating into the already-negative real returns on bank deposits. I really feel like a chump when I think about it.
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