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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (1337)	3/5/2004 4:54:00 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Reducing short term rates to all time lows did not help the economy much. Why do you think increasing them will hurt it so drastically? It's low LONG TERM rates that are fueling the refi boom and the consumer spending it feeds. A modest hike in short term rates may even result in even lower long term rates. Plus, higher short rates will kill the carry trade and deflate some of the financial bubbles going. Roach may have a point. I think it would be an instant DEPRESSION. #1) If short term rates are hiked long term rates will follow #2) Housing will get crushed #3) Huge derrivative players (possibly even banks would get wiped out on the carry trade) #4) Not that this matters (except to me) I would be wiped out #5) The entire world economy would come screeching to a halt #6) I am sure there are nasty ramifications that I can not think of but here is another. Pension plans acroos the nation would get crucified It really just can not be done without lots of time and warning, etc. You just can not go out of the blue and hike rates 2% (unless of course your goal is a deperession) M