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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Mike Johnston who wrote (31529)	5/19/2005 11:37:30 AM
From: GraceZ	Read Replies (1) \| Respond to of 306849

The Fed is not intervening in the long bond market. Long ago they learned that lesson, that they need the long end to be governed by the free market because it is the most reliable indicator of inflation expectations. They do all their intervention in the short (they need to learn that lesson all over again). Long rates are falling precisely because by raising short rates they've effectively killed off inflation expectations (notice I say expectations, not inflation). But more than their fiddling with the FF, the rise in oil prices has ushered in lower inflation expectations because it raises the likelihood of a recession. Plus, you have to understand that the majority of the Tbond buying is being done by CBs from a country where they've suffered through more than 10 years of deflation and falling or moribund interest rates. For them, buying bonds looks like the prudent thing to do. Most alive here in the US have only ever known inflation, so while their actions seem bizarre to us, they make sense in terms of the Japanese experience.

To: Mike Johnston who wrote (31529)	5/19/2005 1:36:28 PM
From: anachronist	Read Replies (2) \| Respond to of 306849

I think there already is and will be a massive intervention in the market by the government. Whatever it takes. The housing economy is too big too fail at this point. You are making the supposition that the government has the ability to determine whether or not the housing market fails. It remains to be seen if they have that level of control. I think they do not, as our government currently exists.