Wednesday, September 20, 2006

 

'Fed Trying To Engineer Soft-Landing'

The Associated Press reports on the FOMC meeting. "The Federal Reserve left a key interest rate unchanged on Wednesday as falling energy prices helped to restrain inflation pressures. Federal Reserve Chairman Ben Bernanke and his colleagues issued a brief announcement saying they would leave the federal funds rate, the interest that banks charge each other, at 5.25 percent."

"The Fed is trying to engineer a soft-landing for the economy in which growth is slowed enough to keep inflation from getting out of hand without overdoing the credit tightening and raising the chances of a recession."

"In its statement, the Fed continued to signal concerns about inflation, repeating a phrase it had used last time, that the Fed's rate setting panel 'judges that some inflation risks remain.'"

"The decision to keep rates unchanged Wednesday was supported by a 10-1 vote with Jeffrey Lacker, president of the Fed's Richmond regional bank, again casting the lone no vote. Lacker, who also dissented in August, argued again that another quarter-point rate hike was needed to keep inflation in check."

"Economists who believe the Fed is finished raising rates point to the drop in energy prices as a major factor that will help slow price pressures going forward. Also helping to lower inflation pressures has been a big slowdown in housing followin

"PIMCO, one of the world's largest bond managers, expects the U.S. economy to slow appreciably over the next 12 months, a PIMCO executive said Wednesday."

"The biggest downside risk for global growth is a sharper-than-expected slowdown in the U.S. housing market, said Paul A. McCulley, a managing director and portfolio manager at PIMCO."

"PIMCO expects the effect on growth outside the U.S. to be mild, with global inflation increasing modestly over the next 12 months, causing the European Central Bank and the Bank of Japan to continue to raise interest rates, even as the Federal Reserve stays on hold, McCulley said."

Comments:
Any news? SF #'s are out. One county is down 6% YOY. Having withdrawls!!?!?!? Need HBB!!!
 
We have been trying to upload the files all morning. I appreciate everyones patience.
 
Ben,

It would probably help if you could throw up some kind of temporary page showing "server upgrade in progress" or similar message. Those that don't visit here or your other blog are likely to be pretty panicky by now. ;-)
 
Sounds like Lacker is the only one in the pack that sees the inflation rate for what it is... One big crock of cooked twisted and BS numbers!
 
If you are trying for a soft landing, this is exactly what I would do. You know you can't say we're on the verge of disaster, or that is what you'll get. The longer you can put it off, maybe something will magically happen. Here's how you do it.

Rates need to be high to support the dollar. You physically can't do it because of the massive debt, so you do the next best thing. You make people think you'll raise them. You leave them exactly where they are, but talk about potentially raising them in the future. Heck, even have one of the members vote to raise them. Better would have been to have a couple, but that might have spelled a disaster in the equity market, so go with just one.

They'll keep this game up right until they can't anymore. When the economy is obviously going down, they'll cut. However, their speak will be it is just temporary, with potential for hikes possible....blah...blah...blah.

Other than telling the truth and letting the chips fall where they may (always the best policy, but since been going on for so long it would be very painful now), what would anyone else do in the same situation?
 
"You leave them exactly where they are, but talk about potentially raising them in the future"
That is interesting comment Kerk!
Thak You!
 
Yes, but what the anal fisting I'm taking in gold?
 
Surfer,
I don't think gold is an investment. Putting money into a company who mines it, sure. But not gold itself. It is preservation of wealth. An insurance policy for lack of a better term. It doesn't pay anything. As this massive debt gets unwound, I just don't see anywhere better to store your wealth. It may lose some value, but I think it'll pale in comparison to equity markets or cash in banks. We've bailed out financial crisis' before, but our debts were nowhere near what they are today. We start bailing anything out, the $ will be in a freefall, literally.
 
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