What inflation? For most finished goods, producers can't pass through price increases because others will bite the bullet. You think Chinese goods are going to get more expensive here? Bullshit. They'll just eat the loss of margin. If they don't, they stop selling stuff. If they stop selling stuff, they have an even worse employment situation than they already have. China and ilk care about production and employment. They could give a shit about profits, and they will eat what they have to in order to keep selling to us. Food and energy are going up because demand for them are going up. That's not inflation in the normal sense, it's scarcity. Sorry, but oil was too fucking cheap for a long time. Lots of other stuff too. Maybe we can stop paying farmers to NOT grow beans now. Again, this is NOT about asset prices. It's about keeping the economy's circulation ok. Do savers of USD get punished? Yep. There is NOTHING that can be done about that. The USD has been overvalued forever, and THAT is what the market is wising up to.
This is so confusing I don't even know where to begin. Is it your contention that the Fed shouldn't have eased more because Credit-Anstalt proves this? If so, please explain. The last remark is beneath contempt, but you knew that when you made it.
Besides AC, people ignore the obvious. Consumers/mortgage borrowers ect. are NEVER in our life time going to acquire money at 50bp to Funds again. Hence a lower funds rate only facilitates the institutional usury of money center banks being able to borrow at wholesale from Uncle Sam while retailing to the public at wide spreads. If "liquidity" were a be-all elixir then why did credit contract in the first place? Because assets are over priced and cash flow/debt service ability is diminished.
Hungary Nov CPI rises to 7.1 pct on food Guardian Unlimited, UK High food prices push inflation to 8.67 percent Daily Times, Pakistan - CPI up 6.9% in November China Daily, China China's inflation rate hits 11-year high ABC News - 9 hours ago SURVEY: Argentina Seen Reporting Nov CPI Up +0.7% FXstreet.com The Foreign Exchange Market, Spain - Dec 3, 2007 "'Real' inflation in Argentina may be close to 20% year-on-year, which is in line with the public's expectation according to opinion polls, ... Czech CPI spike to 5% boosts crown, rate hike bets Guardian Unlimited, UK Swedish inflation rise creates new rate headache Guardian Unlimited, UK - 14 hours ago Tuesday's data showed both the main consumer price index (CPI) and the underlying CPIX measure exceeded analysts' forecasts. November CPI was up 3.3 percent ...
"You think banks can make money there?" Oh, I forgot the fed is supposed to gurantee bank profitability. In case it isnt obvious by now the US would have been far better off letting lending insitutions fail just like the rest of the market.
I'll let the fact that you used Hungary, China, and the Czech Republic to make your case speak for itself.
don't be a fool. US is just 300 mil and the world is almost 7 bil people. US GDP share in the world GDP probably halved in the last 5 years in nominal dollars. China will find where to sell their goods. US consumerism is not sustainable at current levels and everybody knows it -
Bottom line: no Fed is going to make the same mistake as the Fed of the early Thirties. That's why Greenspan added liquidity after the crash of '87, and responded as quickly as he knew how (not quickly enough) to the dot-com crash of 2000-2001. Bernanke is responding as quickly as he knows how - which may or may not be as quickly as needed - to the current real estate crash. By playing with the discount rate earlier this year, he showed an extremely deep knowledge of his job, far deeper than I would have credited an academic just starting out in his job, which is way more complex than you outsiders, who by your posts reveal no direct knowledge of how the interbank market works, could ever know. Bernanke is smart, very smart, and he earned my respect when he made that discount rate move. Prior to that, I thought of him as a hack for this Admin. After that, I am more than willing to give him the benefit of the doubt. I'm pretty sure he cut a quarter point this time because he knows that the FF is now in neutral territory. He threw the market a bone to buy time while events play out and we all see whether this is 1931 or just 1991.