It comes down to free markets seeking a semblance of parity in global purchasing power. As I've written here before, we American's can make $400 on a Saturday tending bar and know we can "exchange" that $400 for the labor and materials of 10 Chinese guy's manufacturing a plasma. We take it as gospel that an autoworker in Flint provides 20x the utility of an assemblyman in Tampico. It used to be American's worked 10 minutes for a gallon of gas while a Malaysian worked a day. Now perhaps we work half an hour for the same product while the Asian works two hours. Someday we'll be at parity. I'm no liberal but I am fair minded and there's a social-justice tenant saying all men are equal. This bring's us to Bernanke, Cheney and policy. There are two distinct economic American's. One part of America benefit's from asset appreciation rather than labor and the other provide service in exchange for currency/essentials. In a capitalistic society the poor work for the rich. That's fine. That's how poor folk eat and with initiative they can try to be un poor. Hence to keep the chain afloat it's important to keep asset prices away from levels that could cause upheaval. The only people who really benefit from price shock are shorts and those seeking entrance into the asset class. Rest assured, the asset holders aren't looking out for the interest of those two groups. Is there a price to pay for risk avoidance? Of course and it manifests itself in the form of a cheaper currency. A devalued dollar effects the asset holder very little. His assets will generally appreciate in cheap dollars so that they can maintain global parity in price. The America toiling for dollar wages suffers the most as it's they who are assetless and paying more for essentials. Just the same, they'd be far worse off being unemployed. With the negative balance of trade and our number one export being debt how could anyone think that we'd maintain lordship over the third world? Because of our know how? Give me a friggin' break. Been to Compton? Besides those American's with know how-particuarly 6"11 power forwards- are rewarded very nicely. It is what it is.
This best sums up what lowering rates does, and the difference between the 2000 cuts and the 2007 cuts: "The problem is that the last time the Fed embarked on a campaign lowering short-term interest rates, the U.S. dollar index was sitting near 120, gold was near $300, and oil was near $20. Now the dollar index is under 79, gold is over $750, and oil is over $90."
you forgot similarities We didn't have inflation in 2000 and we don't have inlation now You know how they count inflation? if something gets expensive they exchange it to something that is cheaper so no we substitute food and gas to something else We drive on chinese DVDs and eat chinese plasmas LMAO
regarding helth care and education do you know how many canadian doctors and teachers moved to US when exchange rate was 1.5? Do you think they will move now with exchange rate below parity? You defend rate cuts by your own personal uknown reasons for some time But it's clearly you 're biased as you ignore facts Weak currency is never good Countries like Canada and Australia with strong currencies and balanced budget now enjoy real prosperity. And US looks quite third world country now - just in 5 years
You could have made the same argument in the mid 80s, with the dollar plummeting. Arguments aside, if you look at the objective history you'll find most Armageddon based arguments while appearing rational end up being specious in hind site. http://elitetrader.com/vb/showthread.php?s=&postid=1656441#post1656441 (latest post)
A 25 BP cut is a certainty. Although imo there should be no cut. The market over the past week has been pricing in a 25 BP cut.
Ya hit the nail on the head! No Cut, 25bps, 50 bps, it doesn't matter. As soon as it's released markets tank.
bad economic data has been bullish for stocks for EONS... only now is there some semblence of a return to the negative correlation between equity and bond prices...