Wikinvest Wire

How to make commodity prices go even higher

Friday, June 13, 2008

Let's see, the last two rising asset classes didn't really transform into bubbles until the Fed started raising interest rates - I'm warming up to the idea of a higher Fed funds rate.

5 comments:

Anonymous said...

in the words of mister bill, "Oh Noooooooooooo"

Anonymous said...

I'm sure we're supposed to just "get" the point from the chart, but would you care to expound on why?

The RE bubble was caused by artificially LOW rates.

Didn't the bubbles start before rates were raised, and the rates were raised in response to the bubbles?

Tim said...

Markets often become "emboldened" when rates are first raised. This has much to do with the delayed-effect of interest rate increases and investor psychology, as in, "This can't be a bubble because prices continue to go up even though the Fed is tightening".

Anonymous said...

It also gives the fed cover, people actually believe the "stupid federal reserve" is behind the curve. Nothing could be further from the truth. They're not stupid, they're acting in the ruling class' interest. No pun intended.

If you think that's bullshit, review Greenspan recommending arm's right around a historical low for fixed rate mortgages. He knew what he was doing, you could tell by his smirk. The playas will ride this crack up boom and bail before the crash.

Anonymous said...

You might also want to show the 1970's gold market where gold rose as Volker raised interest rates. It's only when investors become certain that the Fed will stop the bubble that they start to flee en masse.

Of course, the Fed will not be able to stop the gold bubble, because this time the dollar can't be saved.

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