Joe:
The kids are about to start ringing my doorbell for the tricks / treats, so I don't have much time... I could talk for hours on this subject matter; I'm going out on a limb here because I'm just an amateur, but I do have my opinions :) Regarding your thoughts, suffice it to say that I respectfully disagree for the following reasons:
Before the poop hit the fan (in the US credit markets), we were about as primed as we ever have been. Productivity and the strong dollar kept the "i" word at bay. But these old men have spent their lives worried about the "i" word, and they (rightfully so)were aware that the resilience within the CPI could only go as far as a strong dollar and productivity increases would take it.. Productivity (hard to measure) may not have increased as much as we think it has, and these old men were as much poised to increase as they were to decrease the Fed rate in August - early Sept. Of course, since then the dollar has "crashed."
The ONLY negative growth indicator to come out last week was Capex, as you pointed out. Consumer spending was not down. Indeed, auto sales are part of what primed the GDP numbers. Wage pressure is the highest its ever been in non-inflationary times. And now the G7 ministers have created the magic salve to cure any and all currency flight problems, proactively and for a profit (I'll beleive it when...). Japan is fixing its problems (yeah, right). So we have less risk of liquidity crises and a strong economy. If there are any more strong indicators, in the next two weeks, I'm going to worry that he won't reduce the fed rate.
Counter to this is the reality that he dug a hole of expectation (for another cut) with his "surprise" and that he wouldn't risk tanking the equities market by not cutting. But he is charged w/ responsibility for the US economy, not the equities market.
When I ask what is the currency crisis at present, I wonder (aloud) if anybody can provide numebrs / data which substantiate the continued severity of the crisis of the existence of the crisis itself....
Doorbell is ringing... Sorry about typos...
BP |
