Ben should be looking for a safe spot to make a "soft" landing in his plane with a sputtering engine. Instead he has elected to pull back as hard as possible on the yoke to try and gain altitude. Stall speed is approaching....... _________________________________________ Well said. Lets see if the next quarter is the stall spot.
It will drag and drag until the transition is over. If there is enough "oomph" to compensate for the drag, then the economy doesn't stall. No, I'm not saying that they should take on more debt, but give them an opportunity to replace the debt. If people are up to their eyeballs in debt, and that debt will drag them down to financial ruin, then I think its better for them to refinance that debt to a lower interest rate so that they can fix things. Some people never learn their lesson, but it would help those that do. If I was holding an ARM loan for a homebuyer who couldn't make the payments after their ARM reset, I would offer them a fixed rate, long term loan, after an audit of their finances. I'd do a cost risk analysis of reposessing the property, vs. a loss in interest payments. Of course, I would pre-screen some of the applicants...like they would have to meet certain debt to income ratios...not everyone, or even the majority, could be saved. SM
Stall q1-q2 2008 - enough time for real effects to hit AFTER the elections. That's my best guess anyway, although in these times who can really say?
If you are like me and have been reading all of the discussions on ET and news releases...you are confused about this much of a rate cut @ this time? I have been reading an older book by Harry Schultz "Panics & Crashes and How You Can Make Money Out Of Them". The book is mostly about the causes of P&C going back to Roman Times. It shows by examples that the easy money policy of governments is what causes them. The book got me to thinking that Bernanke & the other Fed Reserve folks are always traveling around the world making speeches, but more importantly talking with other central bankers. Since we are all aware that subprime (easy money) problem is not localized to the US, then we must believe that other central bankers are seeing how big the problem is for them. US banks only have a small percentage of funds on hand vs deposits and if a widespread run on US banks like the one on Northern Rock happens, that could shake the entire US banking system and Bernanke will protect that at all costs! Therefor I think he will cut rates again @ the next fed meeting to protect the banking system.
.. and the printing presses will be turned up even more.. Coming up within the next 12-18 months will be the most opportunistic time in the history of our country to acquire wealth. just remember this.. when you start hearing servers talk about opening up IB accounts to short the dollar, you need to find another edge.
...simply fulfilling their function as Lender of Last Resort. It's in the name: Federal Reserve. If that graph looked any different, they wouldn't be doing what they're paid to do. For an example of what happens when that function isn't performed competently by a central banker with a clue as to why he gets paid, look over at the UK and Northern Rock.