Thanks, Greenie, for the absolute flipping mess - love, Ben
IT’S NO wonder the Federal Reserve is having trouble getting the message about its intentions across to financial markets. Only a complete fool right now would think they could assert with real conviction where the US economy is heading this turbulent summer.
It’s hard to recall a time when there was more contradictoriness about the outlook for the United States. America is either heading for an inflationary breakout, with high oil prices, the falling dollar and a tight labour market finally embedding themselves in price expectations and leading to a surge in inflation beyond the 1-2.5 per cent range in which it has appeared happily confined for years.
Or the combination of rising interest rates, a fading housing market and a consumer increasingly crimped by high energy prices is going to produce a slump, with growth dropping precipitously from the 5 per cent-plus pace of the first quarter to near-recession levels by the end of the year and the beginning of 2007.
This binary outlook is well reflected in the performance of credit markets, where investors seem to veer quickly between the two judgments.
Yet what if, in a sense, both views are correct? Might we be heading for a period of mild stagflation? And if so, what on earth does the Fed do about it? There’s no doubt that activity has slowed since the start of the year. Other data last week showed a broad-based deceleration in the pace of growth. Anecdotally the evidence is even stronger. The housing market is most vulnerable. Many people who took out adjustable rate mortgages fixed for a brief period three years ago when interest rates were rock-bottom are urgently having to refinance at much higher rates this summer. That is going to leave them considerably worse off. Though the economy is much less oil-dependent than it was, oil prices are clearly taking some toll.
June 07, 2006
Into the frying pan or the fire – which way should the Fed jump?
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21 comments:
The Fed needs to get the F out of the economic meddling business. The Fed and US Treasury have take a useful set of economic tools and created a disaster by their constant meddling.
Exactly who was it that created this housing bubble in the first place? Now we expect them make it all OK again by more of the same????
It's time to batten down the hatches and take our medicine. That's what Volker did when events were out of control. He risked a blood-curdling recession in order to wring inflation and inflationary thinking out of the system. Now it is Ben's turn to liquidate an even more frightening bubble.
Backbone, Ben. Backbone.
the tightrope is fraying.
It's different this time. Volker's medicine would kill the patient, so that's not even an option. The Fed has no choice but to "meddle". They will work with the other central banks to delay the collapse for a few more years. One of the Fed governors even said that the growth of a middle class in China and India will eventually solve this problem.
If you want to know what's ahead, just look at the first term of FDR for some examples. We probably will see that kind of government "involvement" for at least the next ten years as the pols try to avoid a revolution.
I expect to see annexation of both Mexico and Canada as new federal territories. We will do this under the guise of fighting terrorism, drugs and corruption, but it will actually serve to bolster tax revenues and add oil and natural gas resources. The younger demographic will also help the housing market recover as all of those new citizens try to buy their piece of dirt.
Mish really scooped Kieth on the pic of Ben and Al holding toilet plungers (economy down the drain). I am still sore from laughing sooo hard!
http://globaleconomicanalysis.blogspot.com/
Canada and Mexico aren't going to be annexed into the USA. All three are going to be diluted into a globalist structure. NAFTA, CAFTA, and the final elimination of US sovereignty: FTAA.
spp.gov is the beginning of the open implementation.
The bill to create a sovereign government only for the Hawaiian Race in Hawaii is another step toward dismantling the USA. The Bush-connected Carlyle Group bought the telephone system in Hawaii from Verizon a year or two ago.
I expect to see annexation of both Mexico and Canada as new federal territories.
You must be joking.
Canada and Mexico aren't going to be annexed into the USA. All three are going to be diluted into a globalist structure. NAFTA, CAFTA, and the final elimination of US sovereignty: FTAA.
This is much more likely. I see steps being taken toward the formation of a super-state with Mexico and Canada. This would fit in with international political theory of power politics and hegemony. The formation being a response to the European super-state and rising power of the Eastern bloc.
Also rising power of China and Korea also. India is becoming a force to be reckoned with as well.
Why is the idea of annexing Mexico and Canada so strange? History has hundreds of examples and precedents. Under the administration of John Adams, we considered annexation of Canada to secure the northern border. Adams even asked Thomas Jefferson what would be needed to conquer Canada. Jefferson's answer was "Thirty days of marching".
Like it or not the U.S. is headed toward imperium, and empires tend to absorb the surrounding states. This could happen by economic and political treaties, a sponsored revolution, or through overt military conquest.
It makes perfect sense from a geopolitical perspective because Mexico has the pool of young workers/taxpayers, and Canada has the natural resources. Both will be needed in coming decades to balance the North American empire against similar empires in Europe and Asia.
Annex? This isn't about a city expanding out into the county. The Mexicans and / or Canadians would not go for it.
You do not annex other countrie's land. You can sometimes buy it like the USA did early on or you can take it. I do not think we want to take either country and I doubt they are for sale.
They will raise rates and on page 6 is why.
http://www.treas.gov/offices/domestic-finance/debt-management/qrc/2005/2005-q4-charts.pdf
"Annex? This isn't about a city expanding out into the county. The Mexicans and / or Canadians would not go for it."
No, we're not in Kansas anymore, and yes, "annex" has a different meaning in this context. As for the local populace not agreeing - empires don't typically care about such niceties. There will be troublemakers and self-styled resistance fighters, and in the scheme of things these troublemakers are rounded up and shot. Besides 70% of Mexicans claim they want to live in the U.S.A. -- I say fine, let's send the border South to meet them!
The Canadians would grumble, and some might curse in French, but really, are there enough of them to matter? The legions will deal with them as needed.
"Annex? This isn't about a city expanding out into the county. The Mexicans and / or Canadians would not go for it."
No, we're not in Kansas anymore, and yes, "annex" has a different meaning in this context. As for the local populace not agreeing - empires don't typically care about such niceties. There will be troublemakers and self-styled resistance fighters, and in the scheme of things these troublemakers are rounded up and shot. Besides 70% of Mexicans claim they want to live in the U.S.A. -- I say fine, let's send the border South to meet them!
The Canadians would grumble, and some might curse in French, but really, are there enough of them to matter? The legions will deal with them as needed.
I think they'll continue to raise but it will be too little too late to hedge off some period of stagflation. I think it will be short, perhaps just a year, but it all depends upon future productivity. I think we'll see some of the highest interest rates we have ever experienced.
According to my FED source 2 more rate hikes for sure to 550 basis points, maybe more if the cold economy(which they expect by fall) doesn't cool inflation by January 2007.
http://video.msn.com/v/us/v.htm?f=email
scroll down to negative wealth effect.
Why is the idea of annexing Mexico and Canada so strange?
Canada and Mexico are completely different animals than they were in the late 18th century. They are both viewed as constitutional democracies by the world. There is no precedent for a democracy invading another democracy, it has never been done. Could it happen? Sure, I guess anything can happen. But is it likely? No, not with the state of affairs in the world and current governments. The U.S. has plenty of other problems to worry about and real threats from greater powers than to be fighting massive guerilla resistance on both sides. The U.S. is already exploiting both the Mexican labor pool and Canadian natural resources; we don't need to take over their countries to do that.
Does anyone really think the US is powerful enough to annex ANYBODY?
We're in a whole new world people. And a LOT of that world is SICK of us and wants us off it's back.
We're not as "powerful" as we used to be.
"Does anyone really think the US is powerful enough to annex ANYBODY?"
Desperate people do desperate things. When the federal government runs low on tax revenues, and Joe Sixpack's pickup runs low on gasoline, you can expect many changes to occur in our political leanings. Both Mexico and Canada are ripe for the picking and I doubt either would put up much resistance. Read history and you will see similar events have happened many times over the centuries.
Unless of course you think "this time it's different" - LOL!
Read history and you will see similar events have happened many times over the centuries.
Name one.
Fast forward henceforth:
"The war between the East and West which is now in its 326th year has at last come to an end. There is nothing left to fight with and few of us left to fight. The atmosphere has become so polluted with deadly germs that it can no longer be breathed. There is no place on this planet that it immune. The last surviving factory for the manufacture of oxygen has been destroyed. Stockpiles are rapidly diminishing, and when they are gone... we must die."
-H.G. Wells
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