There is inflation the FED can do nothing about and then there is inflation that the FED can do something about.
I fail to see how raising interest rates causes rain in argentina, fixes a blast of cold air from canada or corrects a geopolitical mess in Iraq or venezuela.
Undoubtedly low interest rates have caused house prices to rise, low interest rates are some part of rising oil prices (but the exact % is sure questionable, given problems in Iraq, demand in China, and problems in Venezuela).
Low interest rates indeed have caused rampant speculation in the stock market. The bubble in 2000 would have died without a hike and so will this one. (I am not saying we should not have hiked then, I am merely saying it was ready to roll over then and the FED was too late then, and probably too late now).
Perhaps, this rally and stimulus is unsustainable and perhaps is ready to die on its own accord now. As for shorting the Euro, well that may work big time (for a while) if Europe cuts. It sure seems odd for someone who thinks treasuries are a screaming sell and our econony is unsustainable with debt and bubbles everywhere to be long the US$. On that one, I think you may be right (for a while) but for the wrong reason. The US$ fell today and I expect the peak of this rally is close at hand unless Europe cuts. Many here are griping about the waste of money Japan is throwing at the US$ and now you are betting that it will succeed. I guess if you are right, then Japan is right too, finally.
PC prices are down, appliance prices are down, furniture prices are down, if prices at walmart are up, which ones? Sears just slashed benefits across the board. Is that an inflationary or deflationary thing? 10,000 jobs lost at bank one. Is that inflationary or deflationary? 6,000 jobs lost at Kraft, inflationary or deflationary? Lost jobs = fewer people chasing goods. That is deflationary. Now, if you think an interest rate hike will stimulate jobs you are blatantly silly. It will kill the stock market, housing and cost a ton of jobs. Will it cause the price of corn to drop? Will it cause the price of roast pork to drop? Even IF it caused roast pork to drop, would it be worth it?
If this market heads south here, big time and stays down, you will not see a hike to 2006, if then. Nor, will we need one for any purpose either.
M |
