Posts
![[Most Recent Quotes from www.kitco.com]](http://kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Bernanke Sounds the "All-Clear"
Wednesday, January 31, 2007
It appears that Ben Bernanke is celebrating tomorrow's one-year anniversary as Fed Chairman just a little early today by sounding what seems like the "All-Clear".
Housing is on the mend (don't worry about those subprime lenders), economic growth has rebounded (don't worry about the negative savings rate), and inflation has been tamed (don't worry about those stubborn commodity prices).
Here are the policy statements from the last two meetings:
With Jeffrey Lacker of the Richmond Fed no longer a voting member of the FOMC, the vote to hold short-term interest rates steady was unanimous.
Could it get any better than this?
Someone was heard to say that we've transitioned from "Goldilocks" to "Nirvana".
This is reminiscent of the victory laps that Alan Greenspan used to take when a series of economic reports painted such a rosy picture that he felt compelled to take some credit.
Does anyone else think that this may come back to bite Ben where the sun don't shine?
10 comments:
I am not sure that this contraction in housing is enough to take down the economy by itself. Unless it hits consumers' sentiment and they pull back spending, the economy is fine. And we all know there is no inflation (keep your head buried in the sand). Seriously, what will it take for the consumer to stop spending? That is the question. They don't care about inflation.
I ask myself that all the time - when does the consumer slow down?
Clearly we've entered an era where, for many people, debt just doesn't matter. What's the big deal in spending ten or twenty grand when you've got another couple hundred thousand in easily accessible home equity?
You hear all the horror stories about subprime lenders and 2005 homebuyers, but the vast majority of people just carry on.
It seems that an endless war and warnings about global warming and peak oil just make people spend more.
It just occured to me that if a rational consumer is faced with inflation and the interest rates do not adequately compensate for it, the rational response is to spend and not save. Low real rates = higher spending. seems about right to me. It is upto the central banks to restrain demand.
As you detailed earlier today, a "culture of debt" is part of Greenspan's legacy. Until many, many more people can't handle these higher debt loads, it looks like we're going to party on.
The euro and gold reacted as though there'll be enough liquidity around to push them through the roof forever.
Which means that euro traders and gold traders were afraid of a rate hike. Pretty darned afraid.
Which may mean that what we just witnessed was a rate lowering.
In other words, this is Greenspan redux: Bernanke pumping liquidity into a world awash with liquidity.
It cannot, absolutely cannot end well. But how long will it take?
When will people start to believe that prices are going down? That's what it will take.
I ask myself that all the time - when does the consumer slow down?
That is THE question, because we know it's coming. IMO, more time to prepare.
I just caught a couple minutes of "Fast Money" on CNBC and they talked about "Bernankelocks".
It was funny - one of the guys on the show was talking about how he really likes gold and oil now and ten seconds later they were talking about how inflation was so well under control.
What's wrong with that picture?
It's as if they all wink at each other when they use the word "inflation" (except for the economists - or in Steve Liesman's case, the senior economic correspondents).
When Erin Grey spoke of "Nirvana" post FOMC announcement my first thought was top. Ofcourse this could take months to play-out,however noting the Fed. is hinting at a bottom in housing no-question the genie is out of the bottle. Now Gold leaves $ 650 in the dust!
"Clearly we've entered an era where, for many people, debt just doesn't matter. What's the big deal in spending ten or twenty grand when you've got another couple hundred thousand in easily accessible home equity?"
- Yes but this is the attitude of the US govt too. IS it any surprise?
"It seems that an endless war and warnings about global warming and peak oil just make people spend more."
Common sense says its by design.
It appears that the problem here is that the markets are not truely free. Govts intervene again and again and again to prevent problems occuring. In the meantime the debtors continue spending and the prudent savers and bill-payers get shafted.
Its not just in the US this is happening either.
Nothing is going to get the consumer to stop spending. Why should they? If any sort of economic problem arises the government will inflate away all of the public's debt. Even if no problems arise the government will be forced to inflate away the real value of its own debt. Therefore only dumb people (like me) live below their means.
Post a Comment