Red Alert..

[blazespinnaker]

I know I'm beating a dead horse here, but unless the fed can massage the futures up to thinking there won't be a cut in December, I believe the markets are going to tank - big time - when it comes to cutting time and they don't actually cut.

http://www.clevelandfed.org/Research...unds/index.cfm

Look for very hawkish talk in the weeks ahead and significant market drops as the fed tries to manage expectations. I believe gold will stay steady / drop as well. I say stay steady because a lack of a cut in december will probably lead to drastically necessary cuts in the new year.

Also, a democratic president is going to be a shoe in. There's no way the US will have anything to do with republicans after this nightmare..

[blazespinnaker]

Re: Red Alert..

Basically, I think we have to go into recession.

We have to clean out the system. I think everyone knows this - there is no economic heaven without an economic hell. Do we really want to live in economic purgatory for the rest of our lives?

Look for no cut, recession, and the market dropping. I don't believe gold will appreciate as fast as people are expecting.

[DemonD]

Re: Red Alert..

Look for no cut, recession, and the market dropping. I don't believe gold will appreciate as fast as people are expecting.

what's your rationale for this? Pretty much every thing coming out of bumnanke's mouth and the fed is pointing to cutting, they cut before, the markets have been mostly right on cut predictions, I just don't see see it. I'm hoping you are right, but I'm not seeing it.

[blazespinnaker]

Re: Red Alert..

"The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."

Well, that sounds 50/50. Krozner followed up with a statement hinting that foreign currency and energy costs are a concern:

"But, the recent run-up in energy prices and the fall in the foreign exchange value of the dollar suggested to me that, since the September FOMC meeting, somewhat greater inflation risks had raised the costs of easing policy to manage the macroeconomic risks. "

With the recent statements out of OPEC and China .. I am pretty sure that risking a total debasement of the dollar is not something the US wishes to do. It will only cause "inflation to become unmoored" as energy costs sky rocket from a falling dollar. China will have to unpeg from the dollar and then inflation will only worsen.

Besides - we need a recession to clean out the system.. Constantly providing Central Bank Welfare to the US is undermining it's economy.

[DemonD]

Re: Red Alert..

didn't they have a statement that was 50/50 after cutting in september?

[GRG55]

Re: Red Alert..

didn't they have a statement that was 50/50 after cutting in september?

Yes. But back then they were still under the delusion they could save the Goldilocks economy and the banking system, and the currency would take care of itself.

Now they know they can't save the economy, and they are on the verge of a currency and financial system crisis. What a difference a few weeks make...

[jk]

Re: Red Alert..

they have to cut to steepen the yield curve to help the banks. right now their worry is a banking crisis.

[rj1]

Re: Red Alert..

Also, a democratic president is going to be a shoe in. There's no way the US will have anything to do with republicans after this nightmare..

Also, how are the Fed going to delay pain until after next year's election. I'd think they'd want a Republican to win. That's still 12 months away.

[DemonD]

Re: Red Alert..

blaze, one of the things that has forecasted a cut is whether the Fed's actual daily lending rate is below the stated target. Anyone have those numbers? I believe it is below 4.5% so again I don't see where they will be able to even defend a 4.5% rate to begin with.

To be honest though, I truly believe that if the fed cut 250 basis points, it still wouldn't do anything to remedy the current credit crunch. Trillions of fictitious value and bad loans are not going to go away no matter how much the fed cuts.

[touchring]

Re: Red Alert..

With the recent statements out of OPEC and China .. I am pretty sure that risking a total debasement of the dollar is not something the US wishes to do. It will only cause "inflation to become unmoored" as energy costs sky rocket from a falling dollar. China will have to unpeg from the dollar and then inflation will only worsen.

China will do everything, including shutting down part of the stock market if necessary - well, they already banned most housing and business loans for the rest of the year... But they won't unpeg from the dollar, at least not in the short term.

[GRG55]

Re: Red Alert..

blaze, one of the things that has forecasted a cut is whether the Fed's actual daily lending rate is below the stated target. Anyone have those numbers? I believe it is below 4.5% so again I don't see where they will be able to even defend a 4.5% rate to begin with.

To be honest though, I truly believe that if the fed cut 250 basis points, it still wouldn't do anything to remedy the current credit crunch. Trillions of fictitious value and bad loans are not going to go away no matter how much the fed cuts.

US T-bill currently 4.06% (0900 GMT 20th Nov) in the European trade session.

It would appear the Fed is going to have great trouble getting market expectations shifted to accepting no cut in Dec.

[c1ue]

Re: Red Alert..

The market is not going to accept the possibility that the Fed won't cut until B-Nank actually does it once or twice.

The yield curve is absolutely the issue.

At this point it is better to inflate away the bad debt rather than let 1 or more of the top 10 US-based multinational banks disappear.

[GRG55]

Re: Red Alert..

The market is not going to accept the possibility that the Fed won't cut until B-Nank actually does it once or twice.

The yield curve is absolutely the issue.

At this point it is better to inflate away the bad debt rather than let 1 or more of the top 10 US-based multinational banks disappear.

I don't think there's any "until". Seems the market "not going to accept". Period.

Sure looks like Wall St is dialing up the heat on the Fed. This morning there's lots of trafffic about an "emergency" Fed meeting and rate cut. Wonder which is more in danger of melting - the stock price of Govt faves Fannie and Freddie, or Hank's overloaded phone line.

EJ's observation oh so long ago (well it feels that way) that Ben took on a goat job would appear, once again, quite prescient.

[dbarberic]

Re: Red Alert..

Blazespinnaker... I think your getting sucked into the hawkish propaganda talk of the Fed. The Fed right now is playing both sides of the fence and has a good cop/bad cop role for each of the Fed Governors. One Fed governor is talking about inflation out of control and other Fed governors are talking inflation under control.

Its all propaganda. The ultimate customer of the Fed is the banking system, not the citizens of the US or the US government. As JK pointed out, they have to cut to support the banking system.

They are talking out of both sides of their mouth so that what ever your position is, you hear a Fed governor covering it. If your a dove, you hear dove talk. If your a hawk, you hear hawkish talk. They have to manage inflation expectations to prevent a run-away increase in the velocity of money.

I vote for another rate cut. Things are quickly getting out of control in the credit market and the last thing the Fed needs is a equity market crisis.

[DemonD]

Re: Red Alert..

after today i'd be putting my money on another 50 point cut, not just a 25.