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Politics : Welcome to Slider's Dugout

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To: SliderOnTheBlack who wrote (7557)	1/5/2008 5:41:20 PM
From: jim_p	Read Replies (2) of 50720

Ok here's my take, the employment numbers/dysfunctional credit markets are becoming so bad that the market now believes the fed will have no choice but increase liquidity despite rising inflation. The longer the credit markets remain dysfunctional the worse the problems will be once they are fixed. The simple fact is if they don't continue to try to re-inflate the economy they face the possibility of a financial meltdown because they have continued to re-inflate each time they have a crisis and the leverage in the economy continues to expand. At some point in time in the near future the fed has almost guaranteed that we will have a financial meltdown because of their continued attempts to re-inflate. The now obvious recession will make the sub-prime/CDO/SIV crisis even worse than they were expecting a short time ago and it's getting close to panic time if we add a recession on top of a housing/credit bubble ending. My opinion is there is very little they can do and it might just be time to pay the piper if they can't re-inflate one more time. The more they continue to re-inflate instead of accepting a recession as a normal part of the business cycle, the higher the leverage of the overall economy and worse it will be once they are forced to accept the end of a business cycle. The next crisis will be when they begin to realize that their credit default swaps are worthless which will result in further bank write downs, next the CP asset backed credit card receivable will begin to show losses and that trillion dollar market will vaporize over night just like the mortgaged backed CP market did, then on to the other consumer loans and the over leveraged LBO’s that were all done at the very top of the business cycle. These are long term problems that will require long term solutions and the fed has boxed itself in a corner by their past and present actions. Jim Nice day in the markets Friday :-)

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