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FRED
10-25-06, 12:56 PM
Conflicting currents roiling economies (http://www.canada.com/nationalpost/financialpost/story.html?id=69a92a53-3ad0-4590-a01f-1dd0f77aaf79&k=73763)
October 25, 2006 (Jacqueline Thorpe, Financial Post)

More rate hikes possible

In the confusion that is typical when supertanker economies turn, we are back to contemplating the possibility of further interest rate hikes from the Fed.

Wall Street is convinced chairman Ben Bernanke will hold rates steady at 5.25% today, but speculation is brewing the U.S. Federal Reserve's tightening cycle may not be over yet.

It seems like only a nanosecond since both stock and bond markets were surging amid speculation the Fed would ride to the rescue of an imploding housing market as early as the first quarter of 2007.

While stock markets continue to fantasize -- the Dow Jones industrial average hit a record high yesterday -- bonds have sobered up.

The yield on the 10-year U.S. treasury note has risen about 30 basis points to 4.8% in a month. National Bank of Canada notes interest rate futures have gone from pricing in a 45% chance of a rate cut at the January Fed meeting to a 25% possibility now.

Foreign exchange players, meanwhile, have built up a US$8.1-billion net long position on the greenback, the highest since November, 2005.

AntiSpin: Lots of contradictory and incorrect data, as expected. Part of iTulip's prediction on Period X (aka the disinflationary to the inflationary transition in the Ka-Poom cycle), is that as in the early 1930s, the economy and financial systems have fundamentally changed since the last major crisis; the data will be largely comprised of inaccurate measurements of changes going on in the economy and financial markets that are no longer as relevant as in previous transitions, the data will show bewildering rates of change, the data will be misinterpreted by policy-makers, and the official response to the data will be policy mistakes, based on misconceptions of how the system now works. If you read the analyses of the time, you will realize that the leadership within the Fed, Treasury Department, and other institutions were not stupid. They did not understand the system that the economy and markets had evolved into, didn't know how to measure what was happening when this new system went into crisis, did not know how to interpret the data, could not cope with the torrent of data coming in. With the benefit of 20/20 hindsight, we can now say they made many errors of judgement in response. That will happen again.

On the "...housing starts rebounded 5.9% in September and new home sales were up in August..." comment, our resident real estate expert Sean O'Toole says, "No one was really tracking foreclosures prior to 1992. You'll often see 'biggest increase in 14 years' but 'still at historically low levels' statements in reports. While the first statement is true, the last is dead wrong. The problem is the data show only 14 years of history. 1992 was our last big downturn in CA, for example, and foreclosures were at equally low levels in the late 80's, 1990, 1991 and even 1992. Foreclosure levels didn't peak until 1998, years after the recovery began.

"I believe the current increases in foreclosures, rather than being 'historically low' are in fact alarmingly high when compared to the where they were at a similar point in the last cycle. Unlike all the reports that point to the 'historically low' foreclosure levels as a sign of a soft landing, I believe foreclosure levels are actually inversely correlated with market health; hitting 'all time lows' increases the chances of a major crash, probably in the first or second quarter of 2007."

Ishmael
10-25-06, 03:38 PM
I am sorry, but I can not agree with some of your antispin. I think it is an established fact that Coolidge felt that a severe economic downturn and that is why he did not run for a second term. In addition, Ben Strong had died and a new Chairman was at the Federal Reserve. Accordingly, it looks to me kind of like the second string was playing.

Now let's look currently. Anyone who looks at Iraq must wonder what kind of leader do we have in charge. What if our economic policy is just as screwed up as our foreign/defense policy. Personally, I think the Decider has led us into an economic quagmire. Ran up $3 trillion in new debt in three years and allowed the trade deficit grow to a mind staggering sum.

On top of this a large number of the experienced hands have baled at the Federal Reserve (something like 50% are rookies). In addition, I have heard a large number of senior Treasury positions are unfilled because no one wants to take them. Let us not forget that Mellon was hounded by lawsuits the rest of his life after the Depression hit (and that was in a world where lawsuits were rare). Maybe no one wants to be in a senior treasury position when the crap hits the fan and get blamed for it?

Looks to me like maybe the second string (except for the presidency where it is the scrubs) are playing this game.

With regard to foreclosure I am in total agreement; however, as a percent to total homes foreclosure might be lower than the 90's. We are in the early innings of this game.

Hold onto your hats boys, it is going to be a rough ride.

metalman
10-25-06, 04:01 PM
I am sorry, but I can not agree with some of your antispin. I think it is an established fact that Coolidge felt that a severe economic downturn and that is why he did not run for a second term. In addition, Ben Strong had died and a new Chairman was at the Federal Reserve. Accordingly, it looks to me kind of like the second string was playing.

Now let's look currently. Anyone who looks at Iraq must wonder what kind of leader do we have in charge. What if our economic policy is just as screwed up as our foreign/defense policy. Personally, I think the Decider has led us into an economic quagmire. Ran up $3 trillion in new debt in three years and allowed the trade deficit grow to a mind staggering sum.

On top of this a large number of the experienced hands have baled at the Federal Reserve (something like 50% are rookies). In addition, I have heard a large number of senior Treasury positions are unfilled because no one wants to take them. Let us not forget that Mellon was hounded by lawsuits the rest of his life after the Depression hit (and that was in a world where lawsuits were rare). Maybe no one wants to be in a senior treasury position when the crap hits the fan and get blamed for it?

Looks to me like maybe the second string (except for the presidency where it is the scrubs) are playing this game.

With regard to foreclosure I am in total agreement; however, as a percent to total homes foreclosure might be lower than the 90's. We are in the early innings of this game.

Hold onto your hats boys, it is going to be a rough ride.

i agree with most of the antispin here. they weren't dummies in the 1930s, anymore than the guys running things in japan in the 1980s. but most of them believed their own bullshit. and once the ship started to turn turtle, like it wasn't supposed to, no one knew what to do. now it looks obvious: don't let the banks lend 1/3 of their total capital to stock speculators, don't let the money supply collapse, etc. some folks knew there was something wrong...

http://www.itulip.com/nonewera.htm

so we won't make that mistake again. but some other mistake that will in retrospect look just as obvious. and not a new mistake, just one that's new for us... http://www.itulip.com/faceofinflation.htm

so your theory is only the nuts are left running the nuthouse?

fogger
10-26-06, 12:31 AM
my thoughts exactly.

it's only us non-economists that can understand. those guys at the helm are all idiots.