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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Rarebird who wrote (91074)1/31/2008 3:39:59 PM
From: GST  Read Replies (2) of 110194
 
<That is why he has panicked and lowered rates 125 basis points in one week.>

The dollar has two possible legs to stand on -- higher interest rates or higher growth. Ben is banking on higher growth to hold the nose of the clownbuck above water. If US growth does not go into the typical contract and then rapidly expand mode ala the recession will be short and mild -- if instead it goes into a mode of contract and flatline -- then Ben is screwed (and so are most of us) because he has shot his best bullets and cannot goose the economy with much else, and he can't raise rates to defend the dollar.

Much depends upon the growth rate of the US economy next fall. We can have a stock rally and a steady dollar till summer -- then a wait and see till the fall. If the fall brings no recovery, then it is a long way down to reach realistic levels for the dollar, and the house of cards falls.
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