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

To: Knighty Tin who wrote (8678)	7/3/2004 6:57:22 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 116555

respectfully disagree if this administration has more guts they would redefine Iraq as a Federation

To: Knighty Tin who wrote (8678)	7/6/2004 12:49:04 AM
From: mishedlo	Respond to of 116555

Interest rates stay real easy safehaven.com The Fed is raising interest rates but continues an easy Monetary Policy. How can this be? How can the nominal level of interest rate for Fed Funds be raised from 1 percent to 1.25 percent while Greenspan is still considered "easy"? The reason is this policy lives in a land of "Inflation and Money Illusion". Money illusion occurs when you give the consumer more money to spend, when it actually buys less. The consumer is left thinking they still got something for their new money because they are still thinking about yesterday's prices. Because most people, including investors, can be fooled this way year in and year out, inflation can continue to be used by the world's central banks to cheat savers and subsidize borrowers. ... Given the timing of inflation flowing into the United States, the rise in the CPI on a year over year basis, is back loaded into the end of 2004. The following chart is a highly likely projected reading for the Real Fed Funds rate assuming: 1) for the remainder of 2004, the monthly CPI fluctuates between 0.3 percent and 0.4 percent (which is less than the current monthly rate of increase; and 2) the Federal Reserve raises the interest rate on Fed Funds by 0.25 percent at its scheduled FOMC meetings in August, September, November and December. [see link for chart] Looking through this Money Illusion, "Easy Al" can clearly continue to live up to his name. Raising interest rates to a level lower than increased inflation means that businesses, households and the speculative community, will undoubtedly wake up to the fact that not only will money remain free, but it is still being subsidized big time.