Gold isn't in a bear market. The bear ended 9/1/98. For decades gold bugs talked about excess money growth, and now not a peep while the aggregates are in upside high gear. Remember, the difference in money growth and output must be made up by inflation, because the gods balance the books on the backs of the poor. That looks like at least 12% which implies 15% fed funds rate. When it gets there, FED will stop pumping to prevent them from rising any further. Actually they'll stop because they'll be out of business just like what happened in 1980.
After decades of low or negative real growth, M2 is knocking down the ceiling and the FED is practically in a panic working the handle of daily direct purchases of bills and notes. Hasn't anyone heard of non-borrowed reserves growth effects? We have left the realm of mere growing RP free float land. I guess that 18 years of restraint creates such mental slack that it takes an extra ordinarily large bowl of punch to get the party going. However fed funds were trading at 5 and 11 steenths today after FED did fixed on Friday. Even on slow days it's hard to get it to stay at 5 1/8. All those reserves and they can't get it down. That refutes any claim about deflation, recession, or other fictitious residues of the forgotten past. There is much to go before we get up to the intrinsic structural deflation down trend, and given the pump rate, it will be a fast climb. A go for the gold move. ABX looks like the way to fly on golden wings.
I know none of you understand this, you just work here. Then there's this report just at the beginning of a new interest rate cycle:
Monday November 16, 1:02 pm Eastern Time
FED SEEN NO LONGER FACING INTEREST RATE CYCLES
By Isabelle Clary
NEW YORK, Nov 16 (Reuters) - Protracted interest rate
cycles are likely a feature of the past for the Federal Reserve
as solid U.S. economic fundamentals and a preemptive monetary policy helped keep both growth and inflation on a steady track, analysts said.
''The nature of the economy has changed and that makes us less prone to cyclical fluctuations,'' said chief economist Michael Moran at Daiwa Securities America.
''This economy is more concentrated in the services sector, something that dampens large (output) swings. Business firms are better at managing inventories than in the past. Also, we had fewer shocks to the economy than in the past,'' Moran pointed out. ''This diminishes the need for huge swings in monetary policy.''
Post-World War II boom-bust cycles were attributable in part to producers' and retailers' inability to foresee slowdown in demand. The U.S. economy was also affected by shocks such as inflationary surges in oil prices or imbalances, like large widening of the budget deficit.
''One of the most significant features of the economy is that we are getting into narrower and narrower ranges of fluctuations in the economy as well as in the inflation and growth rates,'' said managing director David Resler at Nomura Securities International.
''Once upon a time, analysts could have called that 'fine-tuning'. In fact, it reflects the Fed's willingness to act in anticipation of events. It helps avert major problems and thus the need for repeated rate changes.''
Resler said Greenspan's preemptive or forward-looking approach contributed to the greater stability of the U.S. economy -- a key factor in the current expansion's ability to withstand the impact of global financial turmoil.
The Nomura chief economist attributed the Fed's greater ability at foreseeing imbalances in the U.S. economy to changes in the institution.
A DIFFERENT TYPE OF CENTRAL BANKERS
''The Fed now has throughout the institution people who are very savvy about markets and banking. New York Fed President William McDonough perhaps is the best example of that because he brings a unique insight into financial markets,'' Resler said. McDonough, a former banker, also is the number two on the FOMC and the chairman of the Bank for International Settlements (BIS) committee on banking supervision...
This is exactly what was said by the Burns FED in the early '70s. The people who write this garbage, the economists, the FED officials, are headed in the direction to exactly repeat the disasters of the past. Moran, McDonough, and Resler, are three little kiddies playing with fire. None of them has any experience with what comes from their universified knowledge of the past. But when someone states accurate financial history, none is able to comprehend it, because the fools got their knowledge second hand. At least they are admitting that FED is fine tuning, but they are excusing that now because it's ok. The new gods have it under control. I give you your mantra: "They're savvy, they're savvy," and they know the future too. |
