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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: philv who wrote (6142)	1/25/2004 1:39:29 PM
From: mishedlo	Read Replies (1) of 110194

As far as the ECB is concerned, it is possible that they won't move to cut rates, and could be engaged in talking down the Euro right now. It is highly possible that Greenspan wants a lower relative dollar. We aren't privy to their private discussions. The US still requires daily ongoing financing from the ROW, mainly S.E. Asia. How long will they be willing to lose money propping up the dollar at these low interest rates? That seems to me to be the key. Amazing how the debtor can determine the rates that the creditor must accept. Good deal if you can get it. I win if the ECB does not hike. I win huge if they cut. On erurdollars I win the same whether or not they do not hike, they cut, or they hike in small increments after the election. A hike now hurts. 1/4 in Sept will not (unless I plow more into eurodollars in the meantime). More than likely I start betting on the UK or Australia to reverse course. Internationally rates are headed lower and Canada just fired the first shot. As for: Is inflation possible without jobs and wage increases? Could not prices rise in spite? Many would argue that we are seeing that right now. Greenspan may well get his inflation, but not the jobs. Just higher and higher prices as he is finally forced to raise rates to reign in the (up to now unacknowledged) huge credit bubble. Yes people do argue we see inflation now. I have stated my position that it is a mirage based on demand in China. If China acts to curb "inflation" then demand for commodities may fall there. If not, what is a hike in interest rates here going to do about it. That is the key question that keeps being overlooked. How does a rate hike in the US curb demand for oil in China, cause rain in Argentina, cure the geopolitical instability in the mideast and Venezuela, or warm temperatures and lessen the need for NG in the US? Until someone can answer that, all this rate hike is needed to cure inflation talk is pure bullshit. You want to slow down housing here, just cut the money supply and take back some repos and coupon passes. Instead we are going the other way, free down payments on houses! It seems absurd to expect a sudden hike in the face of that. Not seems absurd, it IS absurd. Mish

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