The Kindest Cut?
A lot less Havenstein and a little more Volcker, please.
Two things are needed right now. As I urged in the previous post, Ben Bernanke needs to show some chest hair and make a speech that disowns Fed responsibility for issues that are the raison d'être of Congress and the White House. In addition, the Fed must stand pat next week and take no action. I'm not optimistic about the former. I'm very worried about the latter. If they continue to cut rates here, I wouldn't be surprised if some sort of dollar stabilization plan is in place. The forex markets would quickly sniff this out. Currency speculators would go hog-wild, and of course the main damage would show up well after this administration leaves office.
Finally, a commenter at Barry Ritholtz's blog (must reading these days, by the way) sums things up nicely: "When the Dow futures are ever up 500, will he do an emergency 75 bp raise?"
Two things are needed right now. As I urged in the previous post, Ben Bernanke needs to show some chest hair and make a speech that disowns Fed responsibility for issues that are the raison d'être of Congress and the White House. In addition, the Fed must stand pat next week and take no action. I'm not optimistic about the former. I'm very worried about the latter. If they continue to cut rates here, I wouldn't be surprised if some sort of dollar stabilization plan is in place. The forex markets would quickly sniff this out. Currency speculators would go hog-wild, and of course the main damage would show up well after this administration leaves office.
Finally, a commenter at Barry Ritholtz's blog (must reading these days, by the way) sums things up nicely: "When the Dow futures are ever up 500, will he do an emergency 75 bp raise?"
posted by The Cunning Realist at Wednesday, January 23, 2008
11 Comments:
It is not now, nor has has it ever been, the Fed's responsibility to prop up market prices.
I pooped my pants
CR,
I'm not sure I'm following your dollar stabilization plan argument.
Are you saying that we're buying back dollars in order to stop them from plunging more in light of lower interest rates? That's what I think you're saying.
And then, given that we couldn't do that forever, we'd be setting up for a Soros-type run on the dollar, dumping it like what happened in 92 with the pound?
Whammer
The whole point of this exercise, and those to follow shortly, is to push the consequences of the last 7 years off until the next administration. Plan accordingly.
TheBigPicture is THE place to be during good times and bad times.
One thing I've learned over the past 6+ years is, if you see it in news print, it's not to be trusted.
The Big Picture is garbage. Nothing more than a vehicle to his $$ data.
100 percent agreement with eengineer
EEngineer said... The whole point of this exercise, and those to follow shortly, is to push the consequences of the last 7 years off until the next administration.
If you extend that to nearly everything this administration has done, you've got a firm grasp on reality. Stabilize Afghanistan just enough and dump it to the next Prez. Same for Iraq. Same for the economy.
Seems like cleaning up after George is a recurring requirement. Remember Spectrum 7, Harken Energy, and the deficit he left behind in the TX state budget.
Yet there's not a single Republican candidate at tonite's debate in Florida that will offer policies different from the village idiot, George W. Bush - with the sole exception of Ron Paul who is viewed as the crazy 2008 version of Ross Perot They all will keep us in Iraq, plundering the US Treasury in the process.
None of the major candidates have the balls to tell the world that Bush has been an unmitigated disaster. It's just no wonder we're in such deep shit.
For my part everyone ought to browse on this.
It cannot really have effect, I believe like this.
The guy is completely right, and there's no doubt.
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