50 point Fed cut, what Inflation??
- Thread starter Meister
- Start date
I have no idea what the Fed is doing, but I gotta say... I laffed out loud when I saw your sig pic. Good thing that our Muslim friends can take a joke. 
In my non expert opinion...
They're trying to slow down defaulted mortgages both directly and indirectly.
Lower rates will reduce credit card and other forms of costs. I believe they hope this will free up funds for strapped mortgagors.
Maybe yes or no.
Inflation is what they're prepared to risk.
***********************************Meister said:
They're trying to slow down defaulted mortgages both directly and indirectly.
Lower rates will reduce credit card and other forms of costs. I believe they hope this will free up funds for strapped mortgagors.
Maybe yes or no.
Inflation is what they're prepared to risk.
Its the feds job to be concerned about inflation...its public enemy number one, however its not a problem now and hasn't been for some time. They'll deal with it when it threatens to becomes a problem. Do they know what they're doing?...absolutely. Bernanke is brilliant and totally gets it. I'm much more impressed in a short time with him than Greenspan.Meister said:
Todays market response tells you what wall st. thinks and I love it. Watched my trading account skyrocket from 2:15 - 4:00pm, and took much joy in knowing the shorts got their asses handed to them. Love it...high crude, broker/dealers rebound, tech put on some great moves, gambling stocks going nuts.
Brilliant job Bernanke. Think I'll hire an sp tonite to celebrate.
A unanimous decision might tell us that the Fed sees more downward economic risk than inflation risk.....
If they can contain this it will go in the history books with the Asian currency crisis, largely a non-event.
OTB
If they can contain this it will go in the history books with the Asian currency crisis, largely a non-event.
OTB
I understand your point, yet I am puzzled. Lower interest rates will tank the US dollar even more, which is going to send resources and other imports through the roof. Yet consumer prices are falling. It's all whacked out of shape. I would be worried that foreign investors will bail to avoid a tanking dollar.BottomsUp said:
I doubt it will be seen as a non-event. Many european countries went through the same scenario before the European monetary union was established.onthebottom said:
First, the people in government are laughing, because the devaluation of the currency by half is effectively cutting their "loans" from foreign countries in half. China just lost half of its monetary reserves.
But soon after serious inflation devaluates everybody's savings.
Maybe it will take longer to play itself out, because the $US is the reserve currency of most of the world, but I thing the scenario is inevitable.
Doesn't China tie it's currency to the USD, how did their reserves get cut in half?danmand said:
What scenario is that?
OTB
That's the problem with the US. They are all concerned about stocks going up. But, the long term issue (and Americans are never good at planning long term) is the US dollar spiralling out of control.BottomsUp said:Todays market response tells you what wall st. thinks and I love it. Watched my trading account skyrocket from 2:15 - 4:00pm, and took much joy in knowing the shorts got their asses handed to them. Love it...high crude, broker/dealers rebound, tech put on some great moves, gambling stocks going nuts.
Brilliant job Bernanke. Think I'll hire an sp tonite to celebrate.
The latest from Bloomberg:
Losses in the dollar accelerated after London's Daily Telegraph newspaper reported, citing analysts, that Saudi Arabia may drop its currency's link to the dollar. The dollar was ``hammered'' against other major currencies by the speculation, Adam Cole, global head of FX strategy at the Royal Bank of Canada in London, said in a note to clients. Pressure on Saudi Arabia's peg will intensify ``if the Fed continues to reduce rates, adding to already strong arguments for the dollar to fall.''
If Saudi Arabia is going to switch to the Euro, all the other oil countries will also. China is going to get cold feet and will switch also. Then you are going to look at America similar to Italy or Argentina a few years ago.
Here are some general questions in regards to this..I would like to hear some of your opinions. I know some of you here have great insight on economics in general.
1) Will the current situation have a negative effect on the bond market? Are bonds still a good investment?
2) Will their be a negative effect on the money market rates?
3) Time to buy gold or other hard asset backed stocks?
4) Stay in stocks?
Thanks
1) Will the current situation have a negative effect on the bond market? Are bonds still a good investment?
2) Will their be a negative effect on the money market rates?
3) Time to buy gold or other hard asset backed stocks?
4) Stay in stocks?
Thanks
George W. Bush Jr's response today about this was to "talk to an economist". Gee, looks like he knows what's going on, which is why there is this mess.
Actually, we are seeing consumer deflation and financial inflation. A repeat of 1979, just a little slower. It could mean a bigger longer played out recession (which is what Bush Jr. is trying to do when the Democrats take over). However, a longer played out recession in the USA could be a bigger recession in Canada. The USA has been in a recession since Bush Jr. was in office. Only the financials were in a boom economy. The Middle Class, the ticket that boosts the American economy, kept it going using debt. Now there is a credit crisis. There's already been a bank bailout in the UK. That was the first. There will be more.
QUESTIONS:
1) Will the current situation have a negative effect on the bond market? Are bonds still a good investment?
2) Will their be a negative effect on the money market rates?
3) Time to buy gold or other hard asset backed stocks?
4) Stay in stocks?
ANSWERS:
1) Go with banking stocks, for now, stay away from retail. Past 4 years, there's been a net decrease in the cyclicals for retail and Xmas doesn't look good with the China recalls (and IMO, a consumer retail deflation scale). When the market peaks and beginds to crash, go with J&J and Coca-Cola (the recession stocks).
2) Yes. They will go lower thinking Bernanke will cut again. He probably will.
3) Yes on Gold, Platinum, Oil .....and......corn.
4) Unless you are in for the long haul, stocks until Bernanke stops cutting. Keep an eye on the political nature as well. Once Bush Jr. loses his power (i.e.: if the Democrats shut down the government), then issue puts. I'd stay clear of bonds during the turmoil. It ain't over, the credit crunch is still here.
Gyaos Baltar.
Actually, we are seeing consumer deflation and financial inflation. A repeat of 1979, just a little slower. It could mean a bigger longer played out recession (which is what Bush Jr. is trying to do when the Democrats take over). However, a longer played out recession in the USA could be a bigger recession in Canada. The USA has been in a recession since Bush Jr. was in office. Only the financials were in a boom economy. The Middle Class, the ticket that boosts the American economy, kept it going using debt. Now there is a credit crisis. There's already been a bank bailout in the UK. That was the first. There will be more.
QUESTIONS:
1) Will the current situation have a negative effect on the bond market? Are bonds still a good investment?
2) Will their be a negative effect on the money market rates?
3) Time to buy gold or other hard asset backed stocks?
4) Stay in stocks?
ANSWERS:
1) Go with banking stocks, for now, stay away from retail. Past 4 years, there's been a net decrease in the cyclicals for retail and Xmas doesn't look good with the China recalls (and IMO, a consumer retail deflation scale). When the market peaks and beginds to crash, go with J&J and Coca-Cola (the recession stocks).
2) Yes. They will go lower thinking Bernanke will cut again. He probably will.
3) Yes on Gold, Platinum, Oil .....and......corn.
4) Unless you are in for the long haul, stocks until Bernanke stops cutting. Keep an eye on the political nature as well. Once Bush Jr. loses his power (i.e.: if the Democrats shut down the government), then issue puts. I'd stay clear of bonds during the turmoil. It ain't over, the credit crunch is still here.
Gyaos Baltar.
An article in the Financial Times showed that Gold's rise is MOST correlated with the US dollar's decline, and not any incipient rise in world-wide inflation. Meanwhile, other commodities like copper and zinc (which are rocketing higher) is pointing to a possible rise in inflation.frasier said:
The problem is, it's kind of hard to tell in real time if China's rise is built on a house of cards or if it has solid foundations.....I'm betting that there's going to be inflation around the corner.
What propaganda have you been reading; The Venezuelan Free Press?Gyaos said:
There was a mild recession in 2002 and Q1 2003, but have enjoyed positive growth since then. And virtually all sectors of the economy are in on the act (except autos), not just financials. To suggest there was a recession in the last few years is completely ludicrous.
You're a fool. If the recession was so mild, why drop interest rates to 1%? Why did the US Stock market drop from 12,000 to 7000? That's a serious bear and the consumer has been feeling the brunt ever since in a Bush Jr. service orientated economy.BottomsUp said:
All sectors? Like credit? Like manufacturing? Like the US Dollar? Like wages? This version of the housing market was created using too much debt (i.e.: the money never existed as an ROI). It's a recession, in fact a prolonged recession WITH an on-going bogus oil war. Only financials are in positive based on a weakened dollar and a consumer economy purchased through home-value as if they were ATM machines. Show me a chart in this Bush economy in which the markets rose and the US Dollar strengthened in tandem (excluding the yen)? There isn't one.
To suggest otherwise means you're part of the activity that hopes it will change. Well, it won't.
Gyaos Baltar.
Most of what you say here is completely irrelevant to the point at hand.Gyaos said:
You made the claim that the U.S. economy has been in recession during the entire Bush regime. If in fact this was the case, it would be called a depression, not a recession, accompanied by negative gdp growth for the last 4 years, and the dow would still be at 7,000 (now double that) and fed funds rate would still be at 1%. Of course you're not going to find a chart with the dollar and the stock market going the same way. I guess you haven't figured out that a weak dollar is financially beneficial for a large section of corporate America, which translates into higher profits, and a higher stock market. There isn't a person with an ounce of common sense that would agree with your conclusion.
And by the way if you want to see a fool, look in the mirror.
Ah, but you eat your words with your own contradiction. How can a weaker dollar translate into higher profits when it will cost you more to own the same commodity? The Dow is still at a 7000 value as the dollar was cut by 50%. Just because the Dow says 13,000, it's only a number. The value is cut by 50%. That's right, corporate America has financial inflation, but consumer deflation is what's going on. Just the statement that a prolonged recession is therefore a depression means you know absolutely nothing about anything. I contradict that Japan has never been in a depression since their financial collapse of the 80's and their interests rates are practically 0.BottomsUp said:
In a debt economy (the USA) you think you're looking good but you are really going broke. In a surplus economy, the currency rises in tandem with the market. Look at China, India, the Euro Zone. But America, no.
I have a life, so I don't have to look in your mirror.
Gyaos Baltar (KING OF FINANCE).
You're clueless. I'll give you a few hints why a weaker dollar translates into higher profits. (1) Multinationals getting paid in their foreign subs in euros for instance enjoy huge exchange gains, (2) exporters sell more with a weak dollar,(3) increased tourism i.e. more retail spending by foreigners.Gyaos said:
King of finance? I hardly think so.
Actually I think you will find that our operations in other countries are now more profitable.Gyaos said:
OTB
You think you have the answers before you ask the question. You simply have the wrong answers. In a debt economy, the dollar is weakened in order to get out. But worse it's a credit debt economy where the money doesn't exist against it, so more IOU's are printed to pay off the debt on debt with debt.BottomsUp said:
1) Multinationals have to pay higher to export their goods. Huge exchange gains? In other words stealing the actual profits in their surplus economies that belong to Americans. Surplus economies helped by the US Government which is against their own people.
2) US Exporters sell more, you say? Sell what? Starbucks coffee? A majority of the US exports are imported from China and re-exported. You're still in debt. In fact record debt.
3) Tourism has DECREASED by 30% even though the dollar is weakening. Why is that?
Again, you're looking good, but going broke. Your argument might hold by 25% IF, the dollar stregthens back to $10 oil levels again. Otherwise, you have no profits, only numbers claiming to be profits inside a currency designed to lower in value to zear 0. You claim to know what a Depression is, I suggest you study the roaring 20s.
I think you should take Bush Jr.'s advice, go talk to an economist. Kneel before Zod!
Gyaos Baltar.
