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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (3080)12/10/2003 6:57:41 AM
From: russwinter  Read Replies (3) of 110194
 
<FED is spooked about something>

The economy is rolling over, especially on the consumer side. And the manufacturing strength will also fade fast if the consumer goes. And secondly there is a cost squeeze on the prices paid side for input (much of this caused by weak dollar), unfinished, raw goods, transportation, energy bills, commodities (but not labor), but prices received are still punky.
Message 19578816

rich.frb.org

So a big squeeze is in play, and there is nothing the Fed can do about it, except to start defending the USD (through higher real rates, not intervention). If the USD stays weak, then the input prices will continue to skyrocket. If the USD stays weak, our foreign capital supports will continue to weaken. One percent fed funds rate just feeds the negative feedback loop. "Currency defense" is about to enter the lexicon, and that's bearish for paper and leveraged/risky assets.
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