Not so long ago the Fed was talking about inflationary pressures. Is this a sign that the Fed now fears deflation because of the large losses of financial and real state asset values? If not, this is really just stoking the fires of inflation.
In any case I have to agree this looks like panic. Already the December rate cut was interpreted as a panicked move and it didn't work as intended.
If the Fed keeps acting "panicked" it will lose "credibility" and then it won't matter what it does. We have met the enemy, and he is us — Pogo
For about 30 minutes. Indeed, half an hour later, the CAC was pretty much trading as before the cut. I guess it's a safe conclusion that it is being viewed as not making much of a positive difference. Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
In windpower stocks, Vestas, hammered since weeks, broke back into positve territory all day today, currently up 12%. Nordex, also hammered for weeks, saw similar gains all day today, hovering now at null. It's far too early to tell, but i'm hoping this means wind will become a more preferred investment i these crazy conditions. "Life shrinks or expands in proportion to one's courage." - Anaïs Nin
The Federal Reserve has cut interest rates to 3.5%, a shock three-quarters of a percentage point reduction. Moving to shore up confidence in the US economy...
In fact, I think that exceeding (0.5% cut?) expectations in this way serves to throw petrol on the flames.
IMHO the last thing an over-reaction does is to "shore up confidence", although the markets may yet prove me wrong. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Someone with a clue, instead of a latex-jowled MarketBot, would have had plans in place well in advance.
(Although I suppose someone with a clue would never have been given the job in the first place.)
The solution is politcally unacceptable - tax cuts for the poor and middle classes, aggressive tax increases for the very rich, especially on speculative non-investment, as opposed to structural project funding, a formal end to the Iraq fiasco with all of its pointless spending, a redirection of the money towards social investment, and very strong changes in banking regulation and reporting to clear the crap out of the system.
Instead we'll see more flapping and spinning, and a big pile of 'Complete surprise - who could have expected...?' from the Very Serious People. Also tax increases for the poor and middle classes, tax cuts for the very rich, yet more spending on Iraq, further cuts in social investment, and some modest proposals towards 'self-regulation' for the markets.
Bah. Morons.
I am advising central bankers next week on strengthening their preparedness. I will be telling them to abandon any focus on capital adequacy requirements. It's far too late for that to have any effect on the fall out. They should focus instead on reviewing and modernising their bankruptcy laws, enabling transfer of customer accounts and nominee assets from failing banks to healthy banks, providing for rapid auction of failed bank businesses and assets, and other practical measures for limiting loss, contagion and debilitating paralysis in the markets.
Only once has the ILEI fallen every month in a quarter without leading an actual recession ... in the late 60's, when it was short circuited by two aggressive discount rate cuts.
So no point now avoiding a substantially looser monetary policy that would be taken to "signal" that the Fed fears a recession ... everyone knows a US recession is on its way.
Now eyes turn to China, to see how well they manage to keep growth on track in the lead in to the Olympics. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
If the EU slides into recession, then its a much harder ask. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
