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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Chispas who wrote (67740)	8/17/2007 1:50:07 PM
From: John Metcalf	Read Replies (1) of 116555

-- Federal Reserve Press Release, August 17, 2007 - ...................................................... (John, have you seen any comments on this ?) -- Yes, I've seen a number of comments this morning, though the discount rate had not yet been reduced when I posted last night: 1) They needed to cut the discount rate (direct loans to member banks) rather than Fed Funds (bank-to-bank loans) because the banks were not lending to each other. They did keep a 50 bp spread so as not to become the lender-of-choice. 2) They extended duration to 30 days, which is renewable. This amounts to a policy statement that the Fed will be a backstop until they are no longer needed. 3) Because the discount rate is higher than the Fed Funds rate, they could take a risk to the dollar, because rates on funds actually borrowed are higher than they will be when banks start lending to each other. Dollar has gained 2 yen in 12 hours. 4) Fed Governor Poole took one for the team, reading the absurd "market calming" party line in public on Wednesday, only to have the rug pulled from under him two days later. What have you seen/heard?

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