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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 10,537
Don't hold your breath. The Fed is almost certainly happy to see the housing bubble popping, and they still have a LOT of inflationary pressure to deal with. China didn't exactly stop voraciously consuming, well, everything.
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 10,537
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Originally Posted by Mach1
Why do you think that Brewer?
The housing bubble has pumped up consumer spending a lot and greatly increased demand for a lot of commodities. That translates to a lot of inflationary pressure. It has also lead to a huge expansion of mortgage lending of every description. The bigger a bubble gets, the more disastrous it is when it pops (ask the Japanese). Since the Fed has watch over the banking system and, indirectly, the capital markets, a catastrophic bubble popping would cause serious damage to the banks and markets. Bettter to pop the bubble sooner, take the more modest pain and get on with life.
The housing bubble has pumped up consumer spending a lot and greatly increased demand for a lot of commodities.* That translates to a lot of inflationary pressure.* It has also lead to a huge expansion of mortgage lending of every description.* The bigger a bubble gets, the more disastrous it is when it pops (ask the Japanese).* Since the Fed has watch over the banking system and, indirectly, the capital markets, a catastrophic bubble popping would cause serious damage to the banks and markets.* Bettter to pop the bubble sooner, take the more modest pain and get on with life.
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 10,537
Quote:
Originally Posted by Sam
Can you explain it again?* Preferably in English*
Um, OK. The Fed is probably happy to see housing slide because it helps reduce inflation and lessens the chance that we have a rerun of the S&L bailout.
wab, I don't think I've said before how much I like your posts.
You have a great way of getting straight to the point, and often to a good (perhaps the best) source/opinion/authority/resource for the question at hand.
You have a great way of getting straight to the point, and often to a good (perhaps the best) source/opinion/authority/resource for the question at hand.
Oh, thanks!* I like your posts, too!
If something can't be boiled down to a one-liner, I prefer to take a nap rather than try to understand it.*
its never happened in our economic history that the fed cut rates with unemployment at record lows,,,oil at record highs,,,,commodity prices high and the markets almost at new highs.........why do we think this time they will?
They won't. Along with what brewer has said, the housing bubble and all the re-financing resulting from that has fueled consumer demand, inflation and increased debt levels to enormous levels. I see no rate reduction on the horizon.
brewer12345 i right on the mark. The fed may pause this time but will probably will raise during the next meeting after.* The economy is still humming along...gotta slow it down is their take.* IMHO
Dave
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Born with nothing, still have most of it left!
Need to be on the road more!
The Fed in loud and overt discussion addresses inflation and economic growth. Greenspan, in earlier years, would occasionally mention another elephant in the living room, but that went out of vogue and is now something only addressed quietly.
The elephant is the national debt and its interest. The discussion of it evolved into phrases like "debt service is a not inconsiderable factor in the demand for liquidity from the debt market and has an impact on prevailing rates". Which was Greenspan-speak for . . . if we let rates go too high, the rolling over of US govt debt instruments takes place at higher cost and raises the deficit, which demands even more liquidity from the debt markets.
In this context, it is not at all lost on the Fed that there is some merit in having a floor, not a ceiling, on inflation. Inflation cheapens the value of the large liability on the books called The National Debt. If the debt's interest were merely serviced each year, inflation would "pay it down".
So, it's useful to keep in mind that the Fed certainly has a desired floor on the GDP number, but subtly, they have one on the CPI, too.
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