Posted on 10/30/2007 7:27:10 AM PDT by Hydroshock
[It’s not.]
Then please explain what you meant by:
“if inflation is so bad then why are housing prices dropping?”
Decreasing prices does not equal inflation.
I was poking fun. I realize there is more to it than that...but some of the same people that complained that rising housing costs weren’t included in inflation figures are now harping on inflation.
[Decreasing prices does not equal inflation.]
Your statement implied that housing prices were decreasing because of inflation.
I didn’t mean to suggest that. Sorry - poor attempt at humor that backfired.
[poor attempt at humor that backfired.]
Been there, did that ;-)
I’ve got to believe 25 points is a lock.
I don’t think Bernanke will do 50. First, he did that last time and second, I don’t think he wants the market to expect a series of 50 bp cuts. But I think 25 is a lock tomorrow and I expect another 25 in November.
The news just gets worse and worse for the economy, as you would expect it would, and Bernanke has his Sikorsky on stand by. Time to load up Santa-copter for the latest money drop.
I’ll be shocked if the fed doesn’t cut 25bp tomorrow. Is that enough to push oil to $100 next month? I don’t know.
I think the budget deficit, which is inflationary by the way, has caused the drop in the dollar. The thing best supporting the dollar is that it is still the world’s reserve currency. If not for that, we would be screwed.
The rise in oil prices are due to increased world demand combined with a dollar that has lost some 30% of its value in the past 5 years. If the dollar had not plunged 30%, we would be paying $60 a barrel for crude oil today. So the rise from $30 to $60 a barrel has been from increasing world demand. The other $30 is from our falling dollar. They are equally contributing to the high price of oil.
I agree that inflation is a serious risk. I am anxious to hear what Bernanke says about the inflation risk tomorrow. I assume he is going to cut rates 25bp, so he is going to have to say that the inflation risk is low, or some such BS. By the time inflation kicks in noticeably and in earnest, I’m not so sure the Fed will be able to do very much to control it. They will raise rates, but it will be too late and have to unwind.
If the economic situation is so severe, why do they wait? Why not drop rates weekly? Or, drop them to 1 per cent. A little hyperbole, but you see the point don’t you? If it’s a “sure thing” tomorrow and November, why screw around?
I don’t know the answer. I am used to Greenspan cutting the rate 25bp at a time. Bernanke shocked me with a 50bp cut. I didn’t expect that. In fact, I was hoping he would put inflation to bed first with no rate cut.
I have no clue what the 50bp rate cut accomplished. Oh, the top 1% are making lots of paper money in the market. But besides that? The rate cut seemed to buy the Financials some time, but their losses are still stratospheric. Merrill’s loss still skyrocketed to $8 Billion.
Countrywide is still tanking. The homebuilders are getting crushed. Since commodities were already running toward a bull market and since tech was strong, they didn’t need a 50bp cut.
Is the liquidity crunch over? I don’t see any evidence of that. Nobody is buying ABCP. Nobody is buying CDOs.
What good was it to ease 50bp, besides giving Jim Cramer and all his buddies a boost in the market? I don’t get it.
I am sure we are heading toward a recession, if one has not already begun. Easing credit makes sense to get businesses expanding and investing to stimulate GDP. But consumers make up a WHOPPING 70% of GDP. This is unprecedented. Getting businesses to invest and expand isn’t going to do crap now that the consumer’s debt path to spending has been completely tapped out. Home mortgage extraction is a thing of the past and consumers are currently tapping out their credit cards to the point of only being able to afford to pay the interest on them — the next toasy debt vehicle that is going to implode.
Consumer spending is going to hit a wall and that 70% GDP is going to plunge. How is a 200bp easing by the fed going to make consumers spend money they don’t have and can’t borrow. For the life of me, I have no clue what the Fed expects to achieve with continued easing.
I am a snot-nosed little engineer with no deep knowledge of financial machinizations. If any any financial gurus out there can help enlighten me what the Fed expects to accomplish by easing, and the exact mechanisms and paths the money is going to travel to bolster sagging GDP, I would really appreciate the lesson. Because, for the life of me, I haven’t a clue.
The problem with the Fed’s idea of inflation, and the typical economist’s idea of inflation, is that they persist in using this thing they call “core” inflation, which is inflation ex fuel and food.
What are the two things the consumer is complaining about just now?
Fuel and food.
The Bush administration keeps wondering why people aren’t giving them credit for “the greatest economy in XXX years.” Well, the reason why is that people use food and fuel. Everyone does. And when you look at food and fuel, you see a bigger and bigger chunk of your paycheck going to food and fuel.
When economists remove their craniums from their rectums on this issue, THEN and only then, shall we get a true idea of inflation.
We can choose to do that, or not.
It’s a choice between reveling in the darkness or joining the struggle against the dying of the light.
Eternal vigilance.
Of course he's technically right because it isn't classically cyclical, but I still believe in it.
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