Posted on 01/24/2008 5:09:59 PM PST by HAL9000
Excerpt -
When the Federal Reserve surprised markets with a 0.75 percentage-point cut in the federal-funds target Tuesday morning, the thinking was that concerns about a U.S. recession had so fully enveloped the markets that just about anything could happen. Sure, the thinking went, the Fed was in danger of looking like it had responded to market action rather than an economic report, but if markets were reacting to economic reports, well, it’s all the same in this world these days.However.
The revelation that Societe Generale is taking a $7 billion write-down due to the activities of one rogue trader — and additional reports that the French bank may have been unwinding those positions on Monday, a thinly traded, volatile day when Asian and European markets were rocked with losses, puts the Fed’s move in a new light. Namely, that they were taken in.
“They were sucker punched,” says Barry Ritholtz, director of equity research at Fusion IQ. “What we see now is that it was a very ill-considered attempt to intervene in equity prices.”
Officials at Societe Generale admitted that the firm was in the markets, trying to close these positions in the last few days before telling people what was going on.
~ snip ~
(Excerpt) Read more at blogs.wsj.com ...
That was also the day I sold three shares of Google
Damned if you do, damned if you don’t.
It seemed reasonable to me, but I’m no expert. It seemed preferable to losing trillions in stock value over the period of a few days.
Ben gets beat on regardless of what he does....he did the right thing...market says so!
I don’t always agree with the fed, but I agree with you here.
I think we're going to have inflation in excess of 5% this year if the Fed doesn't reverse that rate cut soon.
IMHO, in times like this, it's best to just bite the bullet at let a recession sort things out.
Of course, given that I'm in a safe academic job and short the real estate market, I stand to benefit from a recession, so that perhaps is clouding my judgement a bit.:)
It was the wrong move. You won’t find a serious economist who says otherwise (or, at least, I haven’t found one). What we had was a crisis of confidence in the market. Two things drive the market on a short-term basis: greed and fear. This was fear.
By taking “emergency” action, Ben gave credence to that fear but also showed himself to not be prudent. He reacted to the stock market, not the economy. Not a good sign for future governance. Personally, I think he wanted to come in on a white horse and be hailed a hero... just like Bush and Co. with this idiotic “stimulus” package...
Ahah!!!
You’re the one!
Well, you could be right. To be honest, I don’t even pay attention to the inflation figures anymore. They play with them so much it’s pointless.
Just thought we should get that out of the way.
This serious economist agrees with you 100%.
Ben should have cut sooner though. I was expecting him to cut the week before. My problem with Ben is he talks too much to try to sooth the markets instead of acting preemptively. By acting after the crap has hit the fan, Ben actually has to make deeper cuts, which is what he is trying to avoid.
“It was the wrong move. You won’t find a serious economist who says otherwise (or, at least, I haven’t found one). What we had was a crisis of confidence in the market. Two things drive the market on a short-term basis: greed and fear. This was fear.
By taking “emergency” action, Ben gave credence to that fear but also showed himself to not be prudent. He reacted to the stock market, not the economy. Not a good sign for future governance. Personally, I think he wanted to come in on a white horse and be hailed a hero... just like Bush and Co. with this idiotic “stimulus” package...”
You’re right on the money. Those of us of “an age” have seen “panics” and “crashes” and real recessions before. The spectacle of Bush and the the congressional Democrats and Republicans wringing their hands and sitting in little pools of urine while formulating a Chinese financed “stimulus” package was disgraceful; good deal for the Chinese though. That land down in southern Greece is looking better everyday.
5%?? Ha, I think we blew through that threshold a long time ago. I paid $90 for three bags of groceries last night with no meat and no alchohol. It did include some good salads from the salad bar and a quart of hot soup, but still...
No way, only if oil goes to 130-150/barrel, which isn't likely. If oil eases back down to 60 or so, it's likely we may have less than 2% this year--especially with housing declines.
Quit buying $45.00 soup!
I bought 7 bags of groceries for 40 bucks 2 days ago. If you buy CMS (convenient meal solution) prep stuff, the markup at the grocery store is similar to, or higher, than a quick food service place so I’m not sure why you are surprised at your bill. Food & even gas still only make up around 15% of my total bill. Even with 10% increase, that’s only 1.5% ‘inflation’ in my overall expenses. Meanwhile it’s much cheaper to buy a house this year than last, clothing is cheaper and nearly all technology is cheaper. Healthcare and education has gone up. My overall cost of living was up about 2.5% last year.
Can you please explain what possible harm can come by lower interest rates? Especially when the rates were too high to begin with and the raising of the rates over the last 3 years have been the primary reason we are in a bit of an economic downturn.
Cutting the fed rate is meant to do one thing: to move money in the economy. It adds money to the economy. Add the right amount of money, you get growth. Add to much money, you get inflation. Add much too much money, you get hyperinflation, like we saw in the 1970s. I don’t think anyone wants a return to mortgage interest rates of 14%.
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