Posted on 04/27/2008 3:01:19 PM PDT by shrinkermd
When the Federal Reserve cuts interest rates for a seventh consecutive time this Wednesday, it will begin to wind down a pernicious campaign that has flooded the market with cheap dollars since last summer. At the same time, the whoosh of air from Europe's deflating credit bubble puts new pressure on the European Central Bank to begin cutting borrowing costs in order to goose growth.
The strategy shifts by central banks will drive a greenback comeback against the overpriced euro, turning back the 15% slide that since August has lifted the euro -- to a record $1.60 last week -- even as the dollar continues to struggle against the undervalued currencies of Asia.
Monetary policy isn't the only catalyst for a healthier dollar. "A lot of what has happened since last summer also is emotional, and that can change on a dime," says James Paulsen, Wells Capital Management's chief investment strategist. Among other drivers: mounting evidence that the credit crisis loosening its grip stateside is still tightening across the Atlantic, and a growing belief that the U.S. economy could bottom and rebound before Europe's.
The rehabilitation, ironically, is driven by a weak dollar, which makes bargains of our exports, fills Manhattan's 65,000 hotel rooms with European tourists, and entices foreign giants from Ikea to Toyota to open factories here to exploit our increasingly cheap labor.
Already, the dollar has begun to strengthen against commodity-driven currencies from the Canadian loonie to the South African rand, and odds are it is close to a bottom against the euro, sterling and most developed-world currencies. On top of that, "negatives about the dollar are more fully discounted compared to the potential positives," says Marc Chandler, Brown Brothers Harriman's currency strategist, who expects the euro to pull back to test the $1.40 threshold this year
(Excerpt) Read more at online.barrons.com ...
Something you both would learn from:
Money as Debt
http://video.google.com/videoplay?docid=-9050474362583451279
The dollar will only turn around when interest rates go up or other central banks cut their interest rates.
Agree with you in all that.
That’s why PMI was invented - to insure banks against those who didn’t have the 20%. However, it is a significant extra cost to the borrower that had to be factored into the 36% of income to be sustainable.
The 20% or better was considered the safest type mortgage, ie property values cound depreciate 20% and the borrower would still be rightside up on the loan.
Banks forgot all that in their greed for the fees. And they were allowed to forget it because they securetized the loans and never intended to hold them to maturity.
Now ? The projection is over 50% of mortgages issued since 2004 will be upside down by this year, hence the “jingle mail”.
“Money is the debt of a bank.”
And there it is in a nutshell. Debt is money.
Which, of course, is why some say the Fed “controls” it - the Fed controls the reserve requirements and the target FFR. They do not have any finer control than that.
More strictly speaking, the Fed has a large “influence” on the money supply.
Where is the Fed responsible ?
For not performing its regulatory function.
For taking MBS on its books in exchange for Treasuries
For now proposing to pay the banks interest on reserves held at the fed
What is the Fed responsible for - the ongoing zombification of banks, just like Japan.
BFS!
I always thought the Fed bought Treasuries (usually) from a Primary Dealer and credited their account at the Fed with newly created money. I await your explanation of how it really works.
It shows the monetary base. Money the Fed has created. Proof that your claim, that the Fed added $2 trillion in MZM in the last year, is wrong, wrong, wrong.
Hint: it does not near term money in circulation.
Hint: duh!
Did you realize that you just became a Marxist you pompous sad unfeeling soul. You have moved yourself from the dispassionate observer hoping to help everyone understand and gain some understanding, to clueless twit, to shill of the world financial order in a few very short posts. This is an amazing screed. It really is.
To view this as just part of the march of historical process, never mind that it ruins the lives, entire lives, of major portions of populations, is Marxist. That is Karl Marx and what he stood for and what he wrote about. That complete unfeeling unthinking jerks like you would not care is how Marx and Engels sold communism as the antidote. So keep it up. You are walking down a well-worn path towards historical oblivion. There must be a special place in hell for folks like you who would see a problem that happened in history and attempt, not to avoid it, but to deliberately repeat it, knowing that it will come out the same way again this time.
And all the doom selling snake oil charlatans demanding we give up our essential liberties
Who is demanding you give up essential liberties?? Some of us are demanding we take back some essential powers we never gave to the government. Or are you defending your constitutional right to the output of a free printing press of fiduciary fiat currency? I think that that is it.
I don't know of anyone around here who is demanding doom and gloom or selling snake oil to deprive anyone of his liberties. Instead a lot of us think that the overly free expansion of credit by the Federal Reserve (and get this through you thick dense skull, no reputable economist thinks anything other than that the FED does control the expansion of money and credit - your idiotic snake oil aside) has so distorted our economy that very little makes any sense any more, and that a bit less of it, and a lot of ruination of entities that do nothing productive, would help put us back on a sound economic footing.
He really lost it on this thread. Kinda funny.
I'm good, but not that good. LOL!
I agree. My original claim was about a maturing CD. According to this, MZM is "M2 less small-denomination time deposits plus institutional money funds". When my CD matures, it is still part of M2 but no longer subtracted out.
I just borrowed some money and caused growth of the money supply. I didn't even clear it with the Fed. The only idiot here is named Andy. LOL!
It was reported yesterday that home prices in LaCrosse, WI ROSE 6% last year.
In fact, the Burns / Volker shift in policy and its consequences is ample demonstration that the Federal Reserve has a lot of control over whether we have very high rates of inflation or not.
It is this little “only” thing. I realize you have been asleep for the past few months, but not to long ago the FED came up with a couple of new ways to inject liquidity in a total dosage of around $500 B -in round numbers - since the beginning of the BSC debacle which everyone besides you calls a bailout. Go to their website and you can read about it.
Oh don't be so dense tikester.
Lending through the separate primary-dealer credit facility -- open to many of the largest investment banks -- totaled $18.56 billion as of Wednesday, down from $25.66 billion the previous week.
I hope Andy watches that. Maybe when Ren and Stimpy is over.
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