very thin article by Villano on Fed trapped on options
main points should be:
if Fed lowers rates, then lost ammunition, and the disparity between Europe's 3.25% shorterm rate and US lower rate becomes an even greater undermining force hurting the USDollar... a resumption of the dollar's decline will have huge implications on the financial markets (stocks & bonds) as well as corporate profitability... furthermore, import prices will gradually rise even as commodities are rising, carrying with them pressure on prevailing rates AND corporate profit margins
if the Fed stays put with no change, then confidence among consmers, investors, economists, and foreigners might continue to wane... for years now the Greenspan Put has been a powerful force (despite my laughter at such an entity)... erosion of confidence in the Federal Reserve can be very damaging
the ultimate irony is that the greatest likelihood is for the credit market to raise rates
for years the US Federal debt has been at a critical enormous and dangerous level... the annual deficit had been diminishing thru the 1990 decade... the US Trade gap has risen beyond the widely regarded critical level of 5% of GDP... now even as the US Financial markets are seeing lost confidence and trust, foreigners are being asked to finance not only new federal deficits again, not only an ever widening trade gap, but a war which most of the world doesnt want
no, the risk now is for a world market veto, and rising rates... after November elections, as Puplava warns, the USTrez Bubble is very likely to begin giving off gas
I have been warning for months now that the United State financial leaders have the illusion of control, for both interest rates and the dollar currency level... that control rests with foreigners now... the stock bubble pulled off a MORPH, via panicky lowered rates, redirected money to produce a bond bubble and real estate bubble... now we have begun to see at least some signals of final stages of these bubbles
when 43-45% of the US Trez debt is owned by foreigners
when $22,000 billion is traded annually in the FOREX currencies
to expect to have control over US rates and dollar valuation is PURE FOLLY and SELF-DELUSION
I have said for months that Greenspam has no control, and this will become apparent in the late summer and autumn in his deliberations over monetary policy (interest rates, money supply)
GreenScrotum is trapped within extremely tight Jockey Shorts
the Fed knows it
DeptTrez knows it
BigBanks know it
Currency Traders know it
some Economists (like Jim Grant) know it
Rubin knows it
JPMorgo, Citibank, GoldSux (Gold Cartel) know it
stock investors, many newer bond investors are about to learn it
rates are going up next, not down
GreenMan's challenge will be to keep rates steady
lower rates are out of the question
only the naive expect lower rates
to lower rates here gaurantees even lower rates later, and finally the Japanized liquidity trap is upon us
/ jim |
