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

To: russwinter who wrote (41266)	9/11/2005 2:13:31 AM
From: basho	Read Replies (1) \| Respond to of 110194

No Russ, I haven't, but even though rates are about unchanged this year I’ve no doubt they'd be a good deal higher without FCB support. I confess -- not having met with much success in the endeavour in the past -- I've pretty much given up on trying to pin down detailed causations of this kind. I've instead fallen back on the simplistic premise that when stripped of its many complexities, the entire game rests on confidence. So long as that holds, the manufacturing machinery of modern finance will probably go on putting out its wares. The Fed’s role, in recent years at least, has largely been to provide at least the appearance of some intellectual justification and of course the illusion of a safety net. As you rightly note, it's the FCBs that have done the heavy lifting. Without their buying the Fed would long ago have had to abandon its cover as a moderate, responsible central bank. They have in effect done the monetising that would otherwise have fallen to the Fed. To my mind, the critical questions are still: at what point do the FCBs’ perceptions of their interests shift?; how will markets react to the Fed trying to pick up the slack?; and, when that time comes, will the Fed be able to stay in front of what will probably be an increasingly chaotic and rapidly evolving unravelling of the credit pyramid? Other triggers may of course -- indeed probably will -- force the Fed to act and face its great test even if FCBs keep their cheque book open. I’ve read this board off and on for a while and really enjoyed a lot of your comments and thoughts, by the way, as well as those of other members. Look forward to making the occasional small contribution.