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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (40945)9/6/2005 4:25:51 PM
From: ild  Read Replies (1) of 110194
 
From today's CI:

Incredibly, if the Fed were to pause or ease to accommodate the Katrina economic fallout, AND the dollar were to continue to move south, you can bet the US trade deficit would begin to expand anew in about ten seconds. Will the foreign community (primarily Asia) accommodate the financing needs implicit in an expanding US trade deficit under current circumstances? Another very important question as the relief efforts and potential rebuilding costs in the Gulf States sure won’t be financed out of the savings of the US. You'll remember from our recent coverage of international capital flows that Asia has been absent from buying US Treasuries in a big way over the last seven months. Maybe more than at any other time over the recent past, the Fed, in all sincerity, has one tough job of anticipating a very uncertain economic landscape ahead. If they get it wrong, they could exacerbate to the downside a US economy already slowing around the edges or, alternatively, incite a bit of further liquidity driven bubble acceleration in either stocks or residential real estate. Remember, the markets know what the Greenspan Fed has reinforced time and again - when in doubt, liquify and deal with any consequences later. We suggest that over the next month or so, it will be very important to listen to the market as opposed to trying to tell it what to do.

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