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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (4873)	1/12/2004 3:19:33 PM
From: russwinter	Respond to of 110194

< I know it is reckless for us to be here. If I was in charge at this point, however, I would be just as trapped as Greenspan. No way in H would I hike here..> Isn't it odd so much passion gets put a debate about whether the Fed should leave rates at a mere one percent in the face of bottlenecks, and skyrocketing costs (I've already made a hundred posts on this, so don't ask me to start here and now with you, comprende?) in most sectors. I guess that should tell us something? As I said it's irrelevant (you misquoted me though, I didn't say it didn't matter, it matters a lot), just that the Fed is now irrelevant. We should now just sit back and watch the shit hit the fan, regardless of what the Fed does. <Yet you still insist that gold is going to force the FEDs hand.> Find one single reference where I ever said this? Gold is an interesting indicator (just one more) but secondary to energy, other input materials and food IMO. As for me being a "great Fed watcher", how could I be, I'm a huge critic of them? <If not why are you bitching about the price of corn or beans as if the FED had anything to do with it?.> Of course they can't make rain, the job of a CB is to head off inflation, work on stable prices. Even Easy Al gave that lip service. Food is just one more manifestation of maladjustment and inflation. So yes, the job of a good CB is to act, and not do an except, except, except, except, and more endless dog ate the homework excuses. <rising interest rates would so to this economy.> Prevent a dangerous inflation from cropping up. Cool things off. If these guys are doing the great job for the economy they claim, why not stress test it? <Please give me your view as to what will happen to the US economy if the FED hikes rates. > The choices and outcomes are poor now. There is no easy way out, but inflation and massive shortages will be the greater evil. <How many companies dependent on short term financing will go to hell in a handbasket quickly if the FED hikes? . Is the job of a CB to save and bail out the walking wounded of every cycle? Not in my book. That's been a large part of the problem. Plus if they are that vulnerable to a 2 or 3 percent fed funds rate, they ought to die, a little natural selection might be a good thing right here and now. There's too much finance, too much retail, too much speculative housing, too many consumer traps and definitely too much maladjustment in the US and now global economy. What positive purpose is there to add to those maladjustments and distortions with one percent FF rates?

To: mishedlo who wrote (4873)	1/12/2004 7:45:38 PM
From: TobagoJack	Read Replies (1) \| Respond to of 110194

<<If the price of food is going up because of rain or the lack thereof in Argentina then please tell me WTF you expect the FED to do about it?>> ... they should try to talk it down, failing that, do rain dance, but ... knowing them, they would try to claim credit for it :0)

To: mishedlo who wrote (4873)	1/13/2004 2:59:17 PM
From: justwhatuwant	Read Replies (1) \| Respond to of 110194

Great debate/discussions on this topic. But lets keep it polite please. My view on this topic is that there are two major forces at work here: 1) FRB - control ST rates in USA - possible manipulation of stock market, gold, PPI/CPI numbers, media - influence (mostly by rhetoric) on the most wealthy consumers in the world (who spend like theres no tomorrow) 2) PBOC - more control of economy in their country than FRB does in USA (thats pure conjecture, based on communist history) - influence (direct) of the most populous consumers in the world (who exhibit greed like the rest of us) They both have their own problems to solve (USA = stagnant? economy, need jobs; China = runaway economy, bad loans, likes jobs). Both economies are putting demand on commodities (either directly or indirectly). Are their actions gonna crash/clash or meld/mold? There is a relationship between them that is tight. They both understand that since they both have much to lose should one/both make a wrong move. I would think that PBOC has the upper hand at this point. The other force at work is "the markets" (FX, stock, bond). They are not singular in nature and hence difficult to predict (eg. recent stock market and bond market rise). And they are all trying to resolve/calculate the next step. That next step is not clear ... in its direction or timing. One thing, timing can take a long time. Just remember the duration and resolve of reaching 5000 on the Nasdaq! The commodities are the fallout of this all. Demand is huge (from both Chain and USA) and supplies are very limited. Limited supplies are obvious (grain storage/crops forecasts, oil production capacity maxed). No hope for short term supply easing. Demand can be reduced by economic fallout. So for short/intermediate term there is no change here. Gold, IMHO, is just another currency. I mean, US$ is risky, Euro ... well ... I dunno, Yen ... naw, Rembini ... not possible, Pound ... yah right. Whats left? Gold. Silver. Thats it. Until FRB acts responsibly or the PBOC does something (currency peg), this is the way its gonna stay. Interest rates in USA. Thats a tough one. Greenspan has his cards well hidden. Talk has always been anti-inflation, yet he is pro-inflation now. Bush says he is strong dollar, but they are really ok with low dollar. How loyal of a Republican is Greenspan? The Nov election mucks things up. Everything (ok, I must have missed something :-) else is a result of these issues and forces. Some notes on the USA Consumer: - Housing: dependent on economy and interest rates but definitely a source of funds for consumer - Food: no price rises yet, but its coming someday - Oil/gas: prices up but we are living with it - So the consumer is "so far so good" and has lots to cash to burn (via credit or mortgage re-fi). I just look at crowds at IKEA and Costco this weekend plus all the new SUVs/mini-vans driving around in my neighborhood and I say things are still moving along. How long? Roach, in a recent article, notes a lesson learned: never underestimate the US consumer. Everything seems to be moving along with some sense of stability. Yes, things are moving (eg. US$ is falling), but its acceptable and moving with a sense of control. We must stand on guard for any changes to this current economic state.