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Aaachooo! Markets are catching subprime flu.
http://biz.yahoo.com/ap/070314/world_markets.html?.v=16
Lets see you are the Fed what are you going to do?
1) Drop rates to stimulated more debt? (Is this even an option at this point).
2) Increase rates because the Chinese are looking for a higher return on thier money than they are getting from US treasuries?
3) Print more $, get helicopter Ben into his flight jacket.
hmmm...
If there is a recession/depression, demand will plummet, which should counteract the inflation we've been seeing. The feds will then be able to drop interest rates and try to juice the system.
At least that's what I'm hoping. I'd love to be able to refinance down to a 15 year mortgage at 4.5%.
We'll see if the feds have a surprise rate cut this meeting.
Garth
Not this meeting, but the next maybe...if these proceeds with speed, then yes this year, but the FED is hung up on inflation at least in their comments.
Inflation won't be counteracted because by lowering rates, they make money cheaper which causes inflation. Econ 101 - Rates go down, MS goes up. Money supply increases by definition are inflationary.
http://thefinancedude.blogspot.com
Creating new money makes money cheaper, and they do it by creating debt via fractional reserve banking and by printing new money. Everything else is a side effect of that.
The feds don't give a damn about inflation....they just want you to think they do. They are fearful of foreigners bailing out of US debt instruments --- which is essentially everything: US Bonds and Treasuries and the US Dollar. What they haven't been telling you is that foreigners have already been bailing from our bonds in record numbers and many countries have announced diversification out of the US$.
The worst of the inflation will hit food/energy/medical. I expect deflation to hit everywhere else. The fed has created this financial pickle and they won't be able to fix it. I expect they will continue to create massive amounts of new money to try and stimulate the economy while holding interest rates higher for longer than anyone expects to try and keep the foreigners invested in the bubble.
Because of peak oil, I expect this will be the last boom/bust cycle that the fed creates in the US for a very long time. And guess what, the boom part is now over.
And the Tresury Dept. has just accused North Korea of counterfeiting U.S. Currency identical to the real thing.
A Cover for our own flooding the market?
You mean the Super Bill? Those have been talked about for at least a decade now. Nothing new really.
http://en.wikipedia.org/wiki/Superdollar
This bit is fairly new:
Like these, maybe?
The source is interesting - the FAZ is roughly (very roughly) the German version of the Wall Street Journal, and is proably the most pro-American major media outlet (not that many Americans are likely to understand that - the FAZ doesn't feel the need to hide reality to spare the feelings of torturers and kidnappers, for example). It is also the hometown newspaper, so to speak, of the European Central Bank and the Bundesbank.
With such stories, you never know where the hall of mirrors leads - as the FAZ, like any major newspaper, is one player in never-ending games.
But still, if there was a German newspaper you would expect to dismiss such a story if printed in any other German source, it is the FAZ, which makes the sourcing alone notable.
Thanks for the perspective. I had been inclined to dismiss this since I didn't have a clue about the reliability of the source. I'll be interested to see where this leads. If the story has legs, you would expect others to pick it up.
I guess they started feeling bad about all those drugs making it into the country so they started printing money instead....oh wait...they still are. Must be making some nice coin. I take it this is used to pay warlords and such, but where do the bills show up when they are detected? I mean these are those notes that make it past all but the best scanners, right?
http://thefinancedude.blogspot.com
Go back to econ classes because fractional reserve banking does not make money cheaper it increases the velocity of the money and how many times it spent. Money is a commodity and it has a price just like everything else and that price is called a discount rate or interest rate.
I agree fractionally reserve banking is egregious, however let's get the facts right.
http://thefinancedude.blogspot.com
Yes, it increases the velocity of money. But it also increases the money supply. Increasing the money supply decreases the value of the money in circulation, hence the devaluation of the dollar. That's what I meant by making money cheaper. I just used the wrong term --- it should have been dollar devaluation.
"If there is a recession/depression, demand will plummet, which should counteract the inflation
we've been seeing."
There's no fundamental law that says we can't have both depression and inflation, although as someone down the threat notes, inflation won't be uniform. Wages and salaries won't inflate nearly as much, for example.