Posted on 09/08/2007 8:50:50 AM PDT by frithguild
We did not have inflation problems when it was down before. This guy needs to re-think his position on real world economics and history.
What is "it" and when was "it" down?
Only if he is a believer of the new economy and the new thinking that the government can control everything. If he is a believer in classical economic theory, he thinks we are in a serious bind ala early 20th Century Germany and Argentina and later Russia.
For most of this century. Before the 17 rate increases the fed did. As recent as 04 it was as low as 1%. I refininced my house for a fixed 30 years at 4.1%
The longer the Fed waits, the more it will have to cut rates later, which will be inflationary. Not to mention all the economic damage that will occur in the meantime, which will also be inflationary.
I guess Luskin hasn't checked the effective funds rate. It's generally been below 5.25% since this liquidity crisis began on Aug. 9th. And the Fed has been using repurchase agreements to add liquidity, not outright purchases. His use of the phrase "pumping" gives the wrong idea.
I wish people like Luskin would help out us amateurs with some names and ticker symbols. I especially would like to know of some good closed-end mutual funds or ETFs in these categories. Or companies that have a decent yield with their growth potential.
Why does no one at the FOMC or the media get that?
Left unsaid by this guy is the reason for oils surge. It neatly coincided with predictions for 6 more named Atlantic storms this season.
"Have you seen what's happened to the dollar on foreign exchange markets this week? As I write it's making new all-time lows.
This is not necessarily a bad thing since it makes our goods and services less expensive to foreigners.
They do, it’s just that the gloom and doom scenario plays better.
“...in 1998 in the Long Term Capital Management crisis. Then stocks fell 19.5% before Greenspan cut the fed-funds rate. In this panic, Bernanke has already cut the discount rate — and stocks never fell even 10%, based on closing prices.”
You’re quoting the S&P-500 index...in 1998, the AMEX Broker Dealer index was down 50%, similarly that index this time was down 29% when Bernanke’s announcement appeared! But recognize the Dollar volumes involved, and the focus on institutions (not retail markets) and the similarity exists in the Fed’s reaction.
Quite a different situation in 2004. Interest rates had to be low for a prolonged period of time because we were in a deflation. Not so now.
Commodity producers add very well. They did so back in the 1970s, too. Easy money ==> higher prices, very simple.
But, you're ok, you refinanced at a good time, and that's the only thing that matters. Food and fuel prices be damned.
The interesting question here is: will Bernanke's Fed be able to unwind/cure/counter Greenbean's 18-year reign of foolishness?
“Have you seen what’s happened to the dollar on foreign exchange markets this week?”
The Dollar Index had dropped to below 80 on 8/06 (first time since 1992), on the ‘credit rumors’. For the next 10 days it had risen to above 82 on 8/16, when Bernanke cut the Discount Rate. It’s now falling on rate cut expectations...it closed at 80.5 on friday. And it’s all relative...Were the ECB to cut rates before the Fed, the index would rise. The markets are stabilizing now (including the ECB, which has stopped jawboning increases). So the actual ‘future’ direction is anyone’s guess.
Wow...in ‘04 “we were in a deflation. Not so now.”
So you don’t buy Cramer’s rant that we ARE in Deflation now, I take it! Certainly Moon’s house price is not inflating, correct? Congress is spending 4.2% of GDP on Defense in ‘08 vs 6.9% in 2004....that’s not inflating! There are many deflationary expectations, and some inflationary ones....tough for anyone to do the math! Especially for the future :)
Two things that blow my mind about this situation are as follows:
1: That supposedly sophisticated, conservative fund mgrs ALL OVER THE WORLD could have fallen for and eagerly sought out this toxic debt. AND, they sought it out most eagerly when it was rated (see last point) as being only a skosh more risky than T-bills!
2: And these same supposedly sophisticated fund mgrs are so bloody freaked out by what’s going on with these markets that they run to Treasuries so violently that on big market smackdown days, they’ve been able to drive T-bill rates close to 2% and on that one day about 3 weeks ago, UNDER 2%! I can’t even fathom the amount of buying frenzy that would create this effective yield. But I do realize that this means that this sludge is literally everywhere. From “no payments for 3 years” deals on big-screeen TVs and mattresses; from utilities selling forward their expected cashflows from customer (gas, elec) payments; to the shopworn examples of toxic real estate debt that have been all over the news. It’s stunning.
Here (cannot even excerpt per FR rules) is some indication of what I’ve been predicting for a while. The S is starting to hit the fan over the ratings agencies that blessed these piles of nonsense.
http://news.independent.co.uk/business/news/article2941937.ece
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