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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: zonder who wrote (24920)3/4/2005 11:11:27 AM
From: J_Locke   of 116555
 
I think his argument about lag is misguided under present circumstances. At the end of 2000 the fed funds rate was 2.7% real, and had been 3.8% real at the end of '99. At the end of 2004 fed funds was -.4 real and had been -1% real at the end of '03.

The present cycle is much more akin to the '91 -'95 timeframe when the real fed funds rate was (end of year):

91 1.3
92 .5
93 0
94 1.6
95 3.0

Compare to current cycle:

2001 1
2002 -1
2003 -.4
2004 -.5

The fed is still well behind the curve. Inflationary pressures don't abate until the commodity cycle turns and the commodity cycle doesn't turn until the fed funds rate gets punitive (i.e 3% real rate.)
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