BGR:
In past exchanges of views with you, I have frequently read one of your posts directed to me and sat here thinking, "how did we end up discussing this particular item when the original discussion item was so removed?"
I haven't had an exchange of views with you for a while now, yet here I sit with precisely the same response,.... how did we get here from where it started out a few days ago?
This time, I decided to find out how this occurs, so I reviewed the posts to decipher how I get caught up with you in these wanderings.
Here are the post numbers, and contents.
# 84092 (BGR to E)
- "There is no PPT,..." (in response to Earlie's comment about PPT possible involvement in the market)
- ECB not going to hike rates anytime soon, so FRB (the FED) has chance to (and should) lower rates.
- fundamentals of the (U.S.) economy remain strong.
- every October, we have this "charade" (presumably drop in market?).
#84105 (E reply to BGR)
- A bit of humour that makes the point that E. thinks the PPT is real
- E. disagrees with contention that "economy is strong " and comments that his indicators show a slowing U.S. economy.
- E. points out that even the Fed thinks the U.S. govt. stats on the economy are baloney.
- E. states that U.S. consumer borrowing appears to be slowing, which "isn't bullish for the general economy".
# 84166 (BGR reply to E)
- yes, borrowing has slowed, (as result of interest rate hikes) "which any first year graduate of Economics knows"
- Now Fed "seems to be done and may in fact lower rates. Now what does that say about the future of the U.S Economy"
# 84180 (E replies to BGR)
- E. comments "that (lowering rates) won't be easy, given the need to maintain the U.S. interest rate differential at or about 2%."
- E also notes that falling stock market may further slow U.S. economy due to reduced "wealth effect".
#84188 (BGR reply to E)
- sees Earlie's comments on the "need" to maintain an interest rate differential as strictly an "opinion"
- "perhaps a smaller differential is what is necessary for stabilizing the Euro"
- "trying to analyze a currency's strength on basis of interest rates is a folly,... What is most important is the underlying strength of the economy."
#84192 (E reply to BGR)
- E. states "I don't hold opinions on rates, I just observe. "It's (the 2% differential) there and it doesn't seem to be shrinking"
- E. comments that E doesn't attempt currency analysis but merely tries to understand what is going on behind the numbers.
- E. comments "historically, massive trade deficits have been dealt with through currency crunches"
- E. further notes that changing reserve currency status (of Euro and U.S. buck) and probability of the Euro's acceptance as a reserve currency "make it a muddy pond in which to snorkle, but one does have to try"
- E. ends with "Is the U.S. economy strong? Certainly debatable, particularly given that the government stats are so useless and distorted. IMHO, it is far too vulnerable to a debt-laden consumer"
#84204 (BGR reply to E)
- Earlie is "back-peddling", because he used the word "need" (referring to the probability that the Fed had to maintain a 2% interest rate differential) then modified his stance. According to BGR, he is now merely "observing a differential and holding no opinions".
- Earlie's debt and current account points are "well taken". "However they are beside the main point." "We were talking about whether or not the Fed may lower interest rates. I see that you still present no reason (opinion, if you will) as to why they should do this."
#84210 (E reply to BGR)
- E. notes that U.S. external debt is over one trillion dollars. Not likely to be repaid, "at least not before significant monetization can work its magic" If it gets sold, bond markets get thumped.
- E. notes that trade deficit is at $500 billion (per annum). Foreigners could get "disenchanted" and cease pouring dollars into U.S.
- E. states that interest rate cuts represent a threat to the continued holding of U.S. debt paper by foreigners and is therefore risky.
#84267 (BGR reply to Earlie)
- a trillion dollars isn't terribly large given the size of the U.S GDP and economy.
- nor is the $500 billion trade deficit, again, compared with the GDP and economy.
- Earlie should "keep things in perspective"
- there were no problems emanating from the Fed's rate cuts in 1998.
- Wonders if Earlie was following the markets in 1998.
- Earlie needs to go to school to learn about currency and bond markets a little bit
Questions and comments
- Yes, I was following the markets in 1998. Actually been doing that for close to two decades as an independent analyst. Also used to put my research on the line by writing a little (7000 words was typical) rag every month about my views.
- As I specifically noted that I don't analyze currency markets, what's the reason for the comment that I go back to school to learn about currencies and bonds?
- You made the leap of faith that the ECB is not going to raise rates soon. (with no supporting reasons, I might add) then made the additional pole vault to a statement that the Fed can and should lower rates (again, no reasons). Then, we hear that the U.S. economy is "strong", again, with no supporting comments. I disagreed with the your last two comments and provided my reasons for so doing. You may not agree with my reasons, but they were supported comments. Yours were not.
- While I was going to let it pass, now I'm not in such a charitable mood, so please explain the "October charade". Hopefully, your comment will include some thoughts on October of 1998.
- One of the reasons I provided in disagreeing with your contention that "the economy is strong" was that consumer borrowing is slowing. You replied that indeed it was, but that this is because of the interest rate lag ("which any first year graduate of economics,... etc."). Have I got this right? I give a reason for my point of view that reduced borrowing "is not bullish for the economy", a reason that you appear to agree with, but which you scurry past to infer that I am a dummy for not indicating why the borrowing is slowing. What am I missing here? To coin a well-worn phrase, HUH??? No wonder I used to frequently refer to "red herring" in our past discussions.
- Speaking of gigantic leaps of faith, now we come to an Olympian example, to wit that the Fed "seems to be done" (lowering rates) and "may in fact lower rates". That is just so improbable as to take my breath away. Never mind that there is no support for this statement (and you love to stick it in posters' faces for this), it just flies in the face of the reality of current bond pit action, where the spreads are truly frightening of late. Check out the spreads for why I say this. Perhaps I am not alone in requiring some further schooling on bonds.
- Forgive me for not feeling a "need" to answer your comment about what a Fed's lowering of the interest rates might do to the economy. Under the circumstances, answering that, given the questionable presumptions on which you based the question, would indeed suggest a need for further schooling at this end.
- Please note that we were NOT "talking about whether or not the Fed would move the rates". (see above to confirm this). You brought it up, then tried to focus the whole discussion on this, in spite of my admission that I don't see myself as anything but an amateur observer in that area. I love the way you dodge past many of the points I make that do speak to the issue that was at hand, to take us off on another direction. "Red Herring"?
- Your suggestion that the size of the U.S. foreign held debt isn't terribly worrisome, doesn't make sense to me,.... and for precisely the reasons you try to muster,..... the ratio of that debt to the GDP, etc. First of all, these are historic ratios that surpass anything we have seen in the past. Since we have had depressions on less troublesome ratios, perhaps they can occur again. Then too, we have the problem that the denominator (GDP, etc)has been exaggerated through "cooked numbers". Does this suggest that the ratios might be even worse than they appear?
- Finally, your comment that there were no problems emanating from the Fed rate cut of 1998, is also something with which I strongly disagree. It poured staggering amounts of excess liquidity into the system, which further compounded an already distorted stock market. It also suggested that the Fed could and would always ride to the stock market's rescue. It also masked the fact that the system came perilously close to the brink. I could go on and on.
This was a long post. For that I apologize to other thread members. But at least it may provide others with an understanding of how you approach a discussion, how you use red herrings to move topics, how you ignore or dismiss good points made by others and how you ignore your own inadequate provision of "back-up" even as you criticize others for lack of same. This approach gets tiresome.
Earlie |
