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

To: russwinter who wrote (40525)	11/3/2005 8:09:44 AM
From: Crimson Ghost	Respond to of 116555

Ex-Fed chief warns on inflation 2005/11/3 NEW YORK, AP Former U.S. Federal Reserve chairman Paul Volcker warned Tuesday that inflation may be getting out of hand "and the United States better watch out." He also warned that Americans are spending more than they produce which cannot go on indefinitely. "The economy is doing pretty well," Volcker said. "The question is how long will it last?" Answering a few economic questions at a session mainly devoted to the investigation of corruption in the U.N. oil-for-food program which he led, Volcker said the U.S. economy was doing well "as a result of our proclivity to consume." People in other countries like lending the United States money because they like to sell Americans the goods that they are consuming, he said. "It's all bridged by money flowing to the United States from Japan, from China, and so forth," Volcker said. "I don't know how long that can go on because we are spending -- consuming and investing -- 6 or 7 percent more than we are producing," he said. "And I think in the long run that's unsustainable." "The key in part is will people maintain confidence in the dollar," Volcoker at the question-and-answer session sponsored by Syracuse University's Maxwell School and Public Agenda, a New York-based nonprofit organization that conducts opinion surveys on issues ranging from education to foreign policy. "There is a sense that there is no alternative around," noting that "the dollar is more and more seen as a world currency. That's what supports this. But if the people lose the sense, and they don't want to hold any more dollars, then we have a problem." Volcker was asked about the impact of rising prices for oil and gasoline, which fueled a 1.2 percent increase in inflation in September. According to the latest figures, the United States experienced surprisingly strong 3.8 percent economic growth in the third quarter -- but an inflation gauge tied to the GDP report showed prices rising at a 3.7 percent rate during the three-month period, the fastest pace in just over a year. "One thing you can say very clearly is that there's some sense inflation is getting out of hand, and the United States better watch out," Volcker said. Volcker was credited with breaking the back of the stubborn, double-digit inflation that plagued the economy in the late 1970s and early 1980s, by ratcheting up interest rates to levels not seen since the Civil War. "We're not in that situation now," he said, "but we better be careful not to get in it." Volcker said the U.S. Congress first, but also the White House, should start addressing the issue of government spending to reduce the federal deficit and build up some assets "in preparation for this inevitable time" when the economy falters. Volcker was succeeded as fed chairman by Alan Greenspan. Last week, President George W. Bush named Ben Bernanke to succeed Greenspan.

To: russwinter who wrote (40525)	11/4/2005 12:41:39 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Darkness before the dawn? The bond timing newsletters I track at the Hulbert Financial Digest have never been more bearish than they are right now. Consider the latest readings from the Hulbert Bond Newsletter Sentiment Index (HBNSI), which reflects the average exposure to the bond market among a subset of short-term bond timing newsletters. As of Thursday night's close, the HBNSI stood at minus 67.4%. That means that the average of the timers included in this sentiment index is recommending that two-thirds of the amount subscribers have allocated to the fixed income market should be invested on the short side of the bond market. That's an aggressive bet that the bond market will decline, and that interest rates will rise. There has been only one other time when the HBNSI dropped to as low a level as where it was Thursday night. That was early last April, very close to its low for the year. The 30-year Treasury bond proceeded to rally by nearly 7% between then and late June, which in the staid world of government bonds is a big deal. marketwatch.com{7F002CAC-FCD1-45EE-9D3A-5274CD70CF38}&siteid=mktw&dist=nbc