Avert recession or control inflation?

NEW -> Contingent Buyer Assistance Program
<p>Who'd invest ina supersize SIV?</p>

<p>Oh wait ... I have a brainstorm ... they should rename it "SuperSIV.com". Everyone knows high tech is where the "smart" money is now right ?!</p>
 
Japan, China Sell Most U.S. Debt in at Least 5 Years

By David Yong and Wes Goodman<p>




Oct. 17 (Bloomberg) -- Japan, China and Taiwan sold U.S. Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar.<p>




Japan cut its holdings by 4 percent to $586 billion, the most since a new benchmark for the data was created in March 2000, Treasury Department figures published yesterday showed. China's ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan's slid 8.9 percent to $52 billion, the most since October 2000.



Asia's dumping of Treasuries exacerbated the biggest sell- off in U.S. financial assets since Russia defaulted in 1998. The dollar has declined by 7.2 percent this year to a record low against the euro as the Federal Reserve cut interest rates last month to support the housing market, reducing the yield advantage of U.S. fixed income assets.
 
<p>So the Asians are not gonna let us quietly default.</p>

<p>But is someone else gonna buy their shoes and halloween lights?</p>

<p>The problem is not their shame in asking for a bailout. . the problem is that they are trying to make something of value out of something which is worthless.</p>

<p>Maybe we should reinvent debt slavery and debtor's prisons for all those sub prime borrowers to make them pay the debts to the wealthy con artists? Except that pension plans and other idiots that the rest of us rely on bought them too. . .</p>

<p> </p>

<p> </p>
 
Well at heart the problem is that Citigroup has too little capital. The fact they were using SIV as a vehicle to achieve that is irrelevant. Why should Citigroup not be forced to issue common stock or preferred stock at a sensible dividend yield. Why should banks that were conservative in their capital structure be penalized?
 
<p>I think Ben figures he has a window of 6-12 months before inflation will become a major problem (or be percieved by the public as a problem) and wants to see if we can minimize a credit crunch / economic downturn which is the current problem. It's a tough stance to take, but I honestly feel he will sacrifice inflation concerns in the near term and cut rates a few more times to get the economy through the upcoming arm resets, foreclosures, and subprine woes which are going to peak early next year. Come 3Q 2008 through I think he will switch focus and raise rates very rapidly. Any thoguhts...</p>
 
amoul,





I think your analysis is a good one, although I also think awgee is correct -- at least for home prices. The market is going to crash hard. The best Bernanke can hope to do is stop it from taking the entire economy along with it.
 
IR - I agree, the market is going to crash. I think he's hoping for a water landing vs. a side of the mountain with a full load of gas landing ;)
 
<p>amoul-</p>

<p>A water landing only provides a slightly smaller chance of death: </p>

<embed src="http://www.youtube.com/v/-GAg5Y5WK24" width="425" height="350" type="application/x-shockwave-flash" wmode="transparent"></embed>
 
<p>I'm starting to thing awgee is mostly right - that graph is going down. Bernake can change some of the little inflection points along the way, but the overall graph ain't gonna change.</p>

<p>Plus, what's up with this speech? (<a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.htm">http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.htm</a>) Is he saying "don't worry, we usually don't know what we're doing, it's normal for us to be flying blind this time too?" If I was on a plane and his some "turbulence" and heard that from the captain, I'd be reallly, really worried ....</p>
 
Actually, I think I read in a crazy survival book once that if you have to bail out of a plane (ie. just you, no parachute), you're better off doing it over a steep mountainside than water. Reason being that when you hit the mountainside, you roll a whole bunch downhill which slows you down gradually. If you bail over water, when you hit the water it's incompressible, so you slow down all at once.
 
if i ever have to bail out of a plane with no parachute, i think i'd prefer the landing spot that ensures instant death. not sure i like the idea hitting a mountainside at terminal velocity and then rolling down it.
 
mino2126 - I see your point, and may I add, with the helicopter he can hover over the big banks and make sure they get all the liquidity.
 
<p><strong>It Has Begun</strong></p>

<p><a href="http://biz.yahoo.com/ap/071019/wall_street.html">http://biz.yahoo.com/ap/071019/wall_street.html</a></p>

<p> </p>

<p> </p>
 
<p>"The Fed will meet on Tuesday and Wednesday and is expected to consider an additional cut to its benchmark interest rate. Investors betting on the Fed’s action appear certain that the governors will cut rates, but some analysts say underlying strength in the economy could dampen chances for a cut. <a href="http://www.nytimes.com/2007/10/26/business/26econ.html?ref=business">The reports</a> are the final flurry of economic data before the meeting..."</p>

<p>Predictions?</p>
 
<p>Meanwhile, Oil is $92/barrel, Gas is back above $3/gal and milk is $4.99/gallon and major complex apartment rents are up 10%.</p>

<p>Luckily, these volatile commodities aren't included in the inflation numbers.</p>
 
You must log in or register to reply here.
Back
Top