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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 (61979)	5/25/2006 11:03:40 AM
From: Wyätt Gwyön	Respond to of 110194

you know, it's time to...

To: russwinter who wrote (61979)	5/25/2006 2:10:13 PM
From: NOW	Respond to of 110194

nice Russ. You dont hink they know well that they are playing with fire in thee rapid fire manipulations? i detect a worsening wobble...

To: russwinter who wrote (61979)	5/25/2006 3:02:25 PM
From: sammy™ -_-	Read Replies (1) \| Respond to of 110194

The greater the ratio of speculative and Ponzi finance, the greater the fragility of the financial sector to rising interest rates and/or other shocks. Ponzi financed assets, in particular, are highly sensitive to both changing perceptions and higher interest rates. Higher rates are injurious as debt service costs rise at the same time the present value of future cash flows drops precipitously. Quoting Minsky, “the rise in long term interest rates and the decline in expected profits play particular havoc with Ponzi units, for the present value of the hoped for future bonanza falls sharply.”

To: russwinter who wrote (61979)	5/26/2006 12:42:06 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Wake-Up Call globaleconomicanalysis.blogspot.com Mish

To: russwinter who wrote (61979)	5/26/2006 2:31:34 AM
From: Mike Johnston	Read Replies (3) \| Respond to of 110194

Another item in the Ministry of Truth operation. Now Bernanke says that price indexes overstate inflation ! This is mind boggling ! Price indexes overstate inflation, Bernanke says Thursday, May 25, 2006 9:05:29 PM afxpress.com WASHINGTON (AFX)-- Commonly used government price indexes overstate the level of inflation in the economy, Federal Reserve Chairman Ben Bernanke said Thursday In a letter to Rep. James Saxton, R-N.J., responding to questions left over from his recent testimony to the Joint Economic Committee, Bernanke said both the consumer price index and the Fed's preferred gauge, the personal consumption expenditure price index, overstate inflation, but show that core inflation is well contained. Fed policymakers are well aware of the upward bias in the inflation gauges. That's one reason why Fed officials have said they want to keep core inflation measures between 1% and 2%; it gives them a cushion to make sure actual inflation rates don't fall below zero. The Fed has no official inflation target or range "Although increases in energy prices have pushed up overall consumer price inflation over the past couple of years, core inflation has been more stable," Bernanke wrote to Saxton. Core inflation excludes the volatile food and energy categories, in order to get a better handle on underlying inflationary trends "The core PCE price index increased 2% over the 12 months to March of this year, about the same as the increase over the preceding 12 months," Bernanke said. "Similarly, the core CPI has increased 2.25% over each of the past two years." The stability of core inflation "has been enhanced by the fact that long-term inflation expectations appear to remain well contained," he wrote The Federal Open Market Committee said after its May 10 meeting that "the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation" and that "inflation expectations remain contained." "Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures," the FOMC said. The Fed has signaled that it may pause in June after 16 straight rate hikes, but that a pause would depend on incoming data and would not guarantee an end to rate hikes. A June rate hike is still a tossup, with markets giving it a 54% chance. PCE price index is more accurate According to a recent study by Fed economists, the CPI likely overstates inflation by about 0.9 percentage points, Bernanke wrote. The PCE price index is better, but also has some upward bias, he said. The PCE price index is preferred by the Fed over the CPI as an inflation measure because it is constructed in a way that captures changes in consumer behavior as prices change. The relative weighting the PCE puts on various consumer categories is also more accurate, he said. In particular, the PCE price index gives housing less weight than does the CPI, while giving more weight to medical expenses. One downside to the PCE price index is that it includes prices of some goods and services that are set in the marketplace, "and so may add some noise to the overall index as a proxy for the cost of living," Bernanke said Although Bernanke did not mention it, the Commerce Department calculates a separate PCE price index that includes only market-set prices, perhaps providing a solution to some of Bernanke's concerns. The market-based core PCE price index has increased 1.5% in the past year, down from a 1.8% gain in the year ending in March 2005 The Commerce Department will report on the PCE price index Friday as part of its monthly income and spending report. Economists expect the core PCE price index to increase 0.2% in April. In the past year, the CPI is up 3.6%. The PCE price index is up 3%. The market-based PCE is up 2.9% fxstreet.com

To: russwinter who wrote (61979)	5/26/2006 9:58:40 AM
From: Mike Johnston	Read Replies (1) \| Respond to of 110194

With each week, what Bernanke and his cohort are saying gets more and more ridiculous. What is next ? I think i have found a solution to Fed's dilemma of how to raise rates ( to break the commodity boom) without actually raising them (to protect housing values). Two tiered rate structure and targeted liquidity ! The Fed would target two separate rates, one reserved for housing and associated industries, the other for the rest of the economy. The Fed would loan money at 3% as long as it would go towards housing ! The entire new bureaucracy could be created to enforce those rules.