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

To: Tommaso who wrote (24193)	1/7/2005 8:35:48 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 110194

You were a good boy and believed everything the magicians at the Fed told you. Unfortunately for the Fed, the list of people who still believe in magic has been growing smaller in recent years. When the Fed tries to raise rates without restricting the money supply, they are like the fabled King Canute sitting at the shore commanding the tide to recede. You look very powerful if you issue your command when it's time for the tide to recede. But if you issue your command when the tide is coming in, you will look both foolish and very wet. The interest rate for money is set by supply and demand, regardless of what incantations the Fed may utter. There is no getting around this fact. Now the Fed can very easily lower interest rates by increasing the money supply. As Fed Governor Ben Bernanke said, "The U.S. government has a new technology called the high speed printing press." Initially the Fed announced they were "raising rates" but without restricting the money supply. They obviously hoped to change market psychology with words without having to actually raise rates by restricting the money supply. This failed to have any effect. The Fed is now reluctantly restricting the money supply to make good on their promise of higher rates. Unfortunately from their point of view this will slow the real economy - what there is left of it. They obviously had hoped to avoid this. .