Posted on 09/18/2007 5:40:50 AM PDT by shrinkermd
Economy: What the Fed does Tuesday will set the tone not just for the rest of the year, but for the rest of the decade. With so much at stake, the central bank has to get it right. That means a bigger rate cut than expected.
In this case, the right thing would be to drop the fed funds rate at least a half-point to 4.75%. This would help keep the credit crunch from morphing into an ugly recession — something the Fed can avoid if it acts quickly and boldly to re-liquefy the economy.
A little over two weeks ago, Fed Chairman Ben Bernanke said these words: “Well-functioning markets are essential for a prosperous economy.” Fed policies, he added, will try “to promote general financial stability and to help ensure that financial markets function in an orderly manner.”
All well and good. But despite a 50-basis-point cut in the seldom used discount rate, the markets have been anything but “orderly.” Or “stable,” for that matter.
Nor is it clear we’ve dodged a bullet when it comes to recession.
There’s a whiff of desperation in the air. This could be seen over the weekend, when Hovnanian Enterprises slashed the prices by 20% or more on homes it has built in 19 states. Along with August’s loss of 4,000 nonfarm payroll jobs — the first such decline in half a decade — and the economy has started to look shaky. As our friend Larry Kudlow puts it, we now live in “a 2% economy” — that is, an economy where trend growth is 2%. We agree with him — not bad, given all that’s happening.
(Excerpt) Read more at epaper.investors.com ...
Definitely going to be a roller coaster ride. Thirty minutes after the announcement before you know the direction of the market.
Something needs to be done about the greedy SOB hedge fund managers. They have roiled this market with their Ivy League math PhD programmers, and have hurt the majority of shareholders through electronic programs that can yo-yo the indices by 150 points in the last 20 minutes of the day. Their inconscionable greed and egos are a detriment to the market that needs to be stopped for the good of all. Small investors do not want to play in a market that is fixed for the hedge funds and is not an even field. They adversely impact all of us with 401k funds and retirement positions.
Got a suspicion Mrs. Clinton will regulate those eeeeeeevil hedge fund managers.
The Fed has been fighting a nonexistent monetary inflation boogeyman for years, balancing the economy in favor of money center banks instead of actual producers of goods and services.
China is thriving because their people can’t afford imports.
150 is fine with me; then lets fix child labor laws to unleash the now idle population of adolescents on the labor market, and have an alternative to the millions of illegals in the country.
Teh cut needs to be 0, the rate hike needs to be at least .25 if not .5 to combat inflation. Wall Street made this bed let them lie in it
Bunch of twenty-somethings, too stupid to pull in their horns. They'll get theirs in due time.
Take away their hair gel, mountain bikes and make them drink tap water...
Oh, the ignominy!
Well said. I have been waiting for a bear trap for 2 months. It is just a matter of time before it is sprung. The bears have had a picnic these last few weeks. But the real story begins after we get the Fed bad kabuki theater off a center stage. My bet as soon as we leave the Fed watchers and return to assessing the earnings potential of stocks, we will enjoy a 1,200 Dow point rally. It will be led by the NASDAQ, not the blue chips.
If you want to put an end to the “greed” of hedge fund managers, the answer is not difficult: eliminate all possibility of risk transfer to the government. No Federal bailouts, no government-backed (i.e., taxpayer-backed) securities, no artificial infusions of liquidity, period. All risk should be borne by the investor. The reason that many actors on Wall Street play fast and loose with other people’s money is the knowledge that if things go badly wrong, Uncle Sam is there to help.
HAHAHAHA!
You forgot your /sarc tag.
Should be 0%. Hold the line.
If there is a rate cut, watch the price of gold, oil, and the Euro. All will strengthen and the dollar will weaken as the Fed is proved to be unwilling to fight inflation and protect the dollar.
Actually, the Fed made this bed by maintaining negative real interest rates for far too long after 9/11, see graph:
What should rational borrowers do when they are presented with negative interest rates? Take the money and invest in hard assets, like HOUSING.
Remind you of anything?
Half a point is enough to help liquidity without doing too much to affect inflation, which largely has been a factor only on things that the Fed funds rate has little effect on (milk...fuel...etc)
Cut that rate!
Cut that rate!
Repealing free trade crap to offset the US's inability to compete with Asian and Mexican labor markets because of our standard of living, medical care system, and defense spending, etc., is an answer to bring manufacturing back to this country and jobs. Part-time retail service sector based jobs with no medical or retirement benefits will not help our kids' employment future.
The politcoho's are caving again to corporate demands and the need to keep the bottom line up.
I still say this Holiday Season will see a drop on a per capita basis. The cost of oil, food, energy and medical care will force that , not to mention foreclosures at an all-time high. Propping the rate to artificially prop up the economy will do nothing but cause inflation to soar even more. Watch and learn.
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