I can't say I think they will do 50 bps in one shot, however I feel if they were truly responsible, it would have good effect to do so, to hand speculators and wild men their heads, way overdue. If it was me, well you already know what I'd do. More likely they will just do the standard 25 bps the next two meetings (maybe three tops), and then the economy will fall off a cliff, and there will be some blow up along the lines listed below that will make them stop or pause.
What finally stopped prior Fed rate hikes:
1 Franklin National Bank obligingly blows up to end the Fed tightening cycle.
2 Penn Square buckles and so does the Fed. Imagine that.
3 In a trifecta, Brazil, Mexico and Venezuela default on their sovereign debt.
4 So long Continental Illinois and so long Fed monetary tightening.
5 How do you start a Fed monetary easing exercise? A stock market crash like in '87 will do the trick every time.
6 S&L's, real estate, junk bonds, and mainline US bank equity start to melt down. No worries, monetary policy disaster relief was on the way.
7 Orange County slips on a peel and so does Kidder Peabody (at least what was the former Kidder).
8 Asian currency crisis, LTCM and Russian currency crisis all within a few years. Fed Funds, you ain't goin' nowhere for a while.
9 How does one prick one of the greatest equity bubbles of a generation? With less than 200 basis points of monetary tightening, that's how. |
