If you think a Rate cut is going to fix this economy you should think twice, ITS NOT. Lowering the rates anymore is going to bring even more problems, you think inflation is under control now (which its not) wait till they lower the rates even more. There is no way of FIXING THIS PROBLEM, the credit bubble is popping and will continue for many years, this was created by the banks and the greedy people making up all these type of investment vehicles such as SIVS and CDOS, this is what it has lead to. Like I keep saying these problems are far from over, the next problem that is being ignored....credit card delinquencies, remember credit card debt is nearing $1 Trillion.
....in which case rates should go lower. A LOT lower. The gov't debt market is saying so, loud and clear. Most of us go by the assumption this will end in the Seventies. It could just as easily end in the Thirties. Which means, it doesn't have to end up in inflation; it could easily be a bust with deflation. Japan in the Nineties is the most recent example of that, for those of you silly enough to think that fiat currencies are incapable of producing this. If credit continues to contract at the current pace, that's exactly what will happen. In that case, the Fed sending rates to 1% or lower will simply be them listening to the market, which will send Treasury rates even lower than 1%. As for the economically illiterate idea that the euro will survive this, forget it. The mess in Europe will be far worse than anything that happens on the western shores of the Atlantic.
fed futures don't usually lie. My gut tells me that USD weakness has already been priced into crude and any cuts will result in minor increases. The bond market never tells a lie. Rates are gonna fall and hard. Carry Trade also confirms fed rate cut.
The big news next month isn't the rate cut but whether the rest of subprime land will have their rates frozen. Basically start taking bets whether Paulson endorses Arnold's ARM freezing plan in the People's Republica of California or does what every other Bush appointee does, absolutely nothing. Preliminary Q3 GDP out Thursday, market expects 4.9%. And to think that back in August everyone said the US was in a recession and Q3 GDP would be in the low 2's.
If what the bond market is telling us will become economic reality I guess oil will be closer to $60 rather than $100 soon.
I strongly agree... couldn't have said it any better myself. Keep an eye on that 2 year dipping under the 3 month...