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

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To: shades who wrote (68005)	8/10/2006 8:12:01 PM
From: bond_bubble	Read Replies (1) of 110194

I see oil and gold down today - maybe people don't NEED those things as bad as the snake oil salesman convinced them they did. Bernanke has said 2% inflation as policy - did I miss something? I see numbers saying money growth is higher than zero. Bernanke is going to goose inflation to an extent even "Slaves" cant bring down the cost of production!! Message 22708283 But, Fed will never allow hyperinflation or even inflation running above 7%. My position is that, it is this inflation (say 7%) that will prevent the Fed from lowering interest rates when banks start failing!! This was the situation in 1931 in US, in 1991 in Japan. That is why we will have systemic risk (and we will never reach hyperinflation stage). I don't see that - I see prices not moving much and inventory levels rising. What happened in UK when interest rates were lowered last year? Prices appreciated 7%!! Now, Fed is holding the interest rates steady at 5.25 well below inflation. This negative real interest rate will feed into the markets providing "some" jobs and thus maintaining home prices for some time -- Let's see how it works out. Yet I know people that are paid/subsidized by the gubbment NOT TO GROW corn. Do you think this will still be the case going forward? Now that there is so much demand from Ethanol manufacturers. In California, LA pays farmers not to farm so that the water can be used for the city gardening!! I thought people where posting SOMA/TOMO charts and the like? Bernanke has said a problem with the depression they didn't loosen fast enough - tightened too long and too far - well I think he has just shown he is willing to stop turning the nut eh? Fed has been quite so far because FCBs have been doing good job. That does NOT mean Fed will do it in the future. The deflation/depression is nothing but an event when Fed says "Sorry, I cant lower rates anymore". I understand Bernanke blames depression on Fed because they did not lower interest rates for 2 years (until 1933 after raising rates in 1931. Although Bernanke foolishly talks about rising interest rates in 1928). How come, reducing after 1 year make so much difference? I guess it could, but as I said, systemic risk happens because wall street thinks Fed will lower rates when they run into trouble and hence they are heavily loading up on risks. If they dont, their peers will! If Fed fails to back them up even for 3 months credit should be unwinding the Greenspan Put will not trusted right? However, if Fed winks to WallStreet, then the interest rates have to go lot higher to avoid job losses. In 1932, Congressman might have paid the foreigners. Not this time!! The credit default has to result in dollar losing its hegemony.

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