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

To: mishedlo who wrote (3986)	4/8/2004 7:01:18 PM
From: CalculatedRisk	Respond to of 116555

mish, in general I agree with you. But that doesn't mean we shouldn't try to fix the imbalances in our economy. In my first post on this subject, I suggested two initial steps: Message 20004279 1) The first step is to tighten credit requirements. We need to stop the moral hazard of rational speculation with programs like zero money down home loans. That alone would slow the RE market. 2) We also MUST change our fiscal policy to prepare for when (and if) we start tightening monetary policy. We need to repeal the Bush tax cuts (at least the top end cuts). After that we can consider tightening to slow inflation. Perhaps the above two steps will be sufficient to hold inflation in check! I agree that we would be walking a tightrope. But I refuse to just throw in the towel. I think it is insane to just keep on this same track.

To: mishedlo who wrote (3986)	4/8/2004 7:05:05 PM
From: gregor_us	Read Replies (6) \| Respond to of 116555

Mish: The Problem with Any Change in the FF is that the market automatically prices in another 2-4 hikes, immediately. So even the people who think 25bps would be "small" are kidding themselves. 25 bps would be huge unless it came with some sort of bizarre Fed Promise to not do it again for another 12 months--which is never gonna happen. The TNX has already "hiked" 50bps since the Jobs report--but people are forgetting THAT does not kill the carry trade, and all attendant derivitaves. FedFunds are at an Emergency Rate for a reason--but I don't have to tell you...