The battle against inflation has reached a critical juncture - basically the point at which initial victories if not followed up, or worse, lost, will absolutely lead to unsolveable predicaments you have seen in other parts of the world (Zimbs came to mind for me).
This is the TRUE face of Mad Max. Not the solemn, melancholic face of defaulted fraudsters, waiting for the next taxpayers handouts, no. The rule is still the same: GET AHEAD of the price actions or else, that means AT LEAST creating a 50-75bps MORE FUTURE Rate increases in the expectation, if immediate action was foregone. This is gonna get ugly or uglier.
The right enemy
12 years ago
18 comments:
The next move, unfortunately, will be a 25-50 basis point cut later this year. I thought the only positive part of FRE's report today was their interest earnings, facilitated in part by favorable interest rate spreads. Why do you think Paulson/Ben/Kohn care how much we peasants pay for food or energy?
I am not accustomed to think peasant vs. non-peasant way. Probably much later once things deteriorate to certain level I may think that way.
Didn't Obama say "We are all peasants now" or was it "We are all Berliners"? Anyway, back to Fed Funds rates. I don't trust much what Liesman has to say but I still feel that he is a conduit for Kohn (and ?Bernanke) and if he says they will not raise, they will not raise.
heheheh. then why do banks go up? Isn't the credit condition great again? Do you mean one of those can be wrong? heheheheh. The game is getting very scary and interesting right about now.
Liesman today, when scolding Bouroudjian (the perma-bull with the GOP badge on his trading jacket), was very honest in describing the perilous situation the banks are still facing and the amount of capital they will still need to raise. He did not claim that a bottom was in for financials and certainly did not say that the credit crisis was over. He also clearly stated that the 300+ rally yesterday did NOT reflect the status of the credit crisis. Why are the banks' stock prices rising? I think some of this has been orchestrated to allow them to raise more capital at favorable prices either with the last few days of this rally or during the next rally into the election.
Mtg, I doubt they will raise rates unless there is a run on treasuries and the $
I agree with Alcan that we get at least another cut by end of year, probably right after the election.
If there is a run on treasuries, Ben will buy the long end (see his 2002 deflation manifesto). If there is a run on the dollar, they will restrict capital flows through various means (see FDR's 1933 confiscation of gold or recent crackdown on UBS offshore accounts). How will they continue to fund?; see Ms. Clinton's one time IRA/401K tax proposal to fund her health care plan in the 90s.
Like the rest of us, Ben said things he didn't mean to say. Like moving around cash from left to right pocket just for fun the way he wrote back then.
McCulley on the other hand (of Pimco) is a crook. He said that US rate must stay low because staying low would benefit those that "has only labor to offer" instead of benefiting the "rich" who "saves money".
How so I ask, after looking at 2001-2004 experience one can conclude with sufficient evidence that such experiment had, and would always fail, often with unintended consequences, such as the great depression #2.
Look, I am very simple here. And I tell you in simple words that during the period of low rates, I was NOT more enticed to work or produce anything. I was benefiting from the bubble tho, because my employers are/were the purveyors of unsafe lending. :D
Also, basic economics, isn't saving supposed to be the + sign in the capital equation to finance the - sign from investments? Or was that also obsolete as an Atari console?
Anyway, now that it's certain the "downside growth risk" is not even a risk but reality, how about cutting the tail on the "upside inflation risk" before it ensures our generational collapse?
Read my lips - no rate hike.
Who is behind your closet Mr. spy? Why do you see an inflation monster near the beginning of every month?
There's that unexpected rate hike in Korea after months of jawboning about growth fears and what not. At some point price inflation really hit raw nerves, that is reading what central bankers have said to date, as is.
I am not as good as reading lips as you are greenie.
What Inflation ? Deflation all around...wait for 3 more months...basically after olympics.
yes, deflation. In fact it is here. What I meant is price inflation, which are subtly different from monetary inflation. These are attempts from some individuals who would like to "reset" prices by dragging the rest of us down. These can have a life of its own and must be stopped before it does.
eh, anyone was listening in on ECB meeting? heheheh. I thought so. That is the correct response. The inflation issue needs front running and I think ECB and Asian banks will be among the first to do those as they're not entirely beholden to the local pigmen (unlike some other country).
wont prices also come down once the demand goes away ? if GDP contracts, job losses increase, consumption reduces, what happens to all the existing supply of "goods"? Wont price inflation reverse ?
price inflation in a monetary deflationary environment ? is it directly proportional ?
In the long run yes, but in the short run, it is exactly the opposite of what McCulley was postulating that instead of the "poor" getting "jobs", a rate cut would thrust the will of the "rich" by temporarily inflating the size of the hole that they chose to hide in. I would say get a bag of angry wild mice, tarantulas, and hornets and push it down that hole in the form of "neutral" rate or maybe just the expectation at 3-4%. We have lost one leg, let's not offer the other one.
McCulley is a crook. His last letter confirms that very well.
I do not see any rate hike though. Think of US as Japan in the 90s. When rest of the world was raising rates, JCB continued its zero interest rate policy. Same will be strategy of Benny and his gang of thieves.
"a rate cut would thrust the will of the rich by temporary inflating the size of the hole that they chose to hide in"
"attempts from some individuals who would like to reset prices by dragging the rest of us down"
"beholden to the local pigmen"
Mtgspy, your own words have explained exactly why they will not raise rates. Your line of work has taken you closer to these people more than most of us; that is why I still don't understand why you think the Fed/Treasury will do other than what's in the banking industry's interest and not ours.
r.e.v.o.l.u.t.i.o.n.
some of us are ratting each other. need $. time is running out. no more handouts. can't scam no more. get it?
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