24 replies to this topic

[OEXCHAOS]

I love it when folks seem to think that they know more than the Fed does. What I know is this. We don't know what the effects of the sub prime mess are, might be, and might have been. We do know that it's unprecedented. Taking aggressive steps to maintain liquidity is very prudent. This allows for a more orderly liquidation of excess housing stock and correction of debt imbalances. Things were slowing fast and hard and had the potential to go to deflation. You don't want that. I predict that we don't see hyperinflation at all, and that if all goes as planned, the fed will bump up after the next reset. But no matter what, I can confidently say that no one here has the expertise to say that the Fed WAS irresponsible. They might end up being wrong or very right. They didn't take undue risk, however, I can tell you. Mark

[SemiBizz]

I say darn the feds... their meddling has caused the problems we have today... markets should determine rates without some quasi government/banker bureaucrat getting in the way. Alan Greenspan was the worst of them. Don't forget who encouraged everyone to go out and get a variable rate loan... and making it sound that you were crazy if you didn't do it... He encouraged the bankers to look the other way on loan applications with his easy-money policies... Greenspan is now telling it like it really was... and laughing about his inscrutable statements. He didn't lead anything... on the contrary... he was a master of deception... with the full intention of misleading everyone. And his long cutting cycle from 2001 forward basically laid the groundwork for the crisis we have today.

[*JB*]

I say darn the feds... their meddling has caused the problems we have today... markets should determine rates without some quasi government/banker bureaucrat getting in the way. Alan Greenspan was the worst of them.

I won't argue about the fed's meddling, there are too many points -- both good and bad about what the fed has done over the years -- to cover.

However, as to your point above -- the markets (for MOST issues) does determine the rates. When the fed was lowering FF rates, the rest of the rates were rising. When they were raising the FF, rates were going down.

Today, all of the longer term rates went UP (when looking at bond and bill futures).

Short term rates, and things link ST CDs will likely fall in the short term in response-- but the market WILL determine the other rates like Mortgage, municiple, longer term treasuries, and bank/institional lending.

IMO, Fed increasing/decreaing liquidy has a far bigger effect.
The rates the Fed controls are over night rates -- and, by default -- the Prime rate which is joined at the hip with the fed funds.

[NAV]

I love it when folks seem to think that they know more than the Fed does.

Mark

I also love when folks think that Fed knows what it's doing. Look what Alan Greenspan is blabbering these days. If he knew what he was was doing, he woudn't be saying the things that he is saying today. So the logical conclusion is either he did not know what he was doing (or the consequences of his doing) or he was wilfully deceiving the world !

What I know is this. We don't know what the effects of the sub prime mess are, might be, and might have been. We do know that it's unprecedented.

Taking aggressive steps to maintain liquidity is very prudent. This allows for a more orderly liquidation of excess housing stock and correction of debt imbalances.

Things were slowing fast and hard and had the potential to go to deflation.

There is always a reason to inflate away.

Edited by NAV, 18 September 2007 - 09:59 PM.

[wyocowboy]

No sense blaming Bernanke - the bond market has been saying for quite some time that fed rates were too high.

[Rogerdodger]

From Inger letter:

the talk expects yet-another 'silver bullet' coming from the Fed, as may have a temporarily salutatory perceived benefit.
If the Fed goes 'that far', it might imply some sort of further train-wreak ahead they're trying to steer away from

[NAV]

I say darn the feds... their meddling has caused the problems we have today... markets should determine rates without some quasi government/banker bureaucrat getting in the way. Alan Greenspan was the worst of them. Don't forget who encouraged everyone to go out and get a variable rate loan... and making it sound that you were crazy if you didn't do it... He encouraged the bankers to look the other way on loan applications with his easy-money policies...



Greenspan is now telling it like it really was... and laughing about his inscrutable statements. He didn't lead anything... on the contrary... he was a master of deception... with the full intention of misleading everyone. And his long cutting cycle from 2001 forward basically laid the groundwork for the crisis we have today.

I completely agree.

[SemiBizz]

We'll know in the next week or so what the real problem is... and then bye-bye market. That's my FF.

[linrom1]

You got to love when folks start talking about injecting liquidity into the system as if this was some kind of magic potion. What is liquidity if nothing other than DEBT. Liquidity has to be paid back as DEBT.

What do lower FEDS FUNDS rates do? They allow borrowers to acquire more DEBT because the borrower is deemed to be able to service more DEBT at lower rates. Ok, so I am not a rocket scientist, but, how do you solve liquidity crack ups with more DEBT. Ok, I see you just keep rolling it over.

Edited by linrom1, 18 September 2007 - 11:44 PM.

[pdx5]

You got to love when folks start talking about injecting liquidity into the system as if this was some kind of magic potion. What is liquidity if nothing other than DEBT. Liquidity has to be paid back as DEBT.

What do lower FEDS FUNDS rates do? They allow borrowers to acquire more DEBT because the borrower is deemed to be able to service more DEBT at lower rates. Ok, so I am not a rocket scientist, but, how do you solve liquidity crack ups with more DEBT. Ok, I see you just keep rolling it over.

Linrom1......you get it exactly right, and I have also said so here
before. This so called "injecting liquidity" is exactly = adding more
DEBT into the system, WHICH HAS TO BE PAID BACK WITH
INTEREST! It is NOT dropping dollar bills from the sky.

And how does lowering rates now is the right solution when lower
rates is what caused the bubble in the first place. But to be fair
the bubble was the result of rates in the 1% neighborhood. We are
now at 4.75%. Still far from 1%. I hope Benny is not as foolish as
the maestro and drop the rates much below 4%.

Also, as the US $ declines, is there any one out here willing to
say that inflation will not advance? And how will the Fed respond
when inflation picks up?

Edited by pdx5, 19 September 2007 - 12:44 AM.