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What If The Fed Fails?

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I cant see how it can do anything but fail. The numbers do not allow for success. And yet, this sort of article, although it carries the numbers and raises the possibility of failure, still can't bring itself to join the dots and state the bleedin' obvious.

To paraphrase:

Are my methods unsound?

I dont see any method at all, sir.

Shit, we're still only 'in Saigon'.................

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Good article - thanks for linking - and not beyond the bounds of possibility imo.

The Fed has set a course, the logical conclusion of which, is that the Fed will be liable for the bad debts of half the world - any country with an advanced financial market. An impossibilitiy! But that's what they are signalling. They hope to be able to stabilise the system before the train hits the buffers - but stopping a runaway trin on a downhill slope to the station is easier said than done. Having jumped aboard and taken over the driving seat, they may find that the train is driving them and not the other way around. There is a possibilitiy that they will find the lever that operates the brakes, but I wouldn't bet on it - not even half a crown.

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Watching Paulson yesterday looking like he had cacked himself, stuttering out "Americans know we are in a down...down...downcline" with those mournful Zombie eyes of his tells us all we need to know. We are F*cked, and the dead will walk the earth.

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Apparently the Fed has another 400 billion 'cash' to hand before they need to start making money out of nothing.

This really will be money out of nothing as they accept the worthless collateral any sensible zombie bank wont touch.

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The fed has already failed. It will ultimately buy the mortgage backed assets entirely rather than lend against them and, for that, the Unites States government will need to create more than 5 trillion dollars. In the process, it will destroy the value of the currency and the US economy along with it.

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If they fail...? LOl

They have already failed its just that they dont know it yet. Yes they will succeed in the very short term. Ask people ask in 6,12, months from now if they think the FED succeeded.

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The fed has already failed. It will ultimately buy the mortgage backed assets entirely rather than lend against them and, for that, the Unites States government will need to create more than 5 trillion dollars. In the process, it will destroy the value of the currency and the US economy along with it.

The German economy was manifestly not destroyed by their hyperinflation ... Rentendollar, anyone? ;)

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Guest Shedfish
If they fail...? LOl

They have already failed its just that they dont know it yet. Yes they will succeed in the very short term. Ask people ask in 6,12, months from now if they think the FED succeeded.

markets saved for one day, at a cost of a quarter trillion USD

not many bombers left now...

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Econbrowser's thoughts:

Another 75

How much ammo is left in that fed funds gun?

Interesting reaction yesterday at the Chicago Board of Trade to the Fed's decision to reduce its target for the fed funds rate by 75 basis points to a new objective of 2.25%. On Monday, the fed funds futures contract had been anticipating an average funds rate of 1.95% for April, consistent for example with a 100 basis point cut yesterday and some weakness prior to another 25 bp cut at the April 29/30 FOMC meeting. However, after yesterday's meeting, the implied April interest rate shot up 20 basis points to 2.15%. The Fed made a big cut, and the market was surprised that it wasn't even bigger.

To put these numbers in perspective, prior to January of this year, the Fed had not made a cut as large as 75 basis points in a single move in the available 25-year history of the series. And yet now we've reached a point where we're surprised when the cut is "only" 75 basis points.

Still, I am glad to see that the Fed recognizes the need for at least this much restraint. I say that not because I am still mechanically thinking about a tradeoff between promoting real GDP growth and containing inflation. I think we are past that now. I could easily imagine this weekend's developments with Bear Stearns as only the initial carnage in what may prove to be a very bloody financial crisis. I accept the view that job 1 is to try to contain that damage.

But suppose you believe that oil over $100 a barrel is a destabilizing influence-- and I do-- and that the Fed's recent decisions on the fed funds rate are the primary reason that oil is over $100-- and I do-- and that further reductions in the Tbill rate have limited capacity to stimulate demand-- and I do. Suppose you also saw a risk that the inflation, financial uncertainty, and slide of the dollar could precipitate a run from the dollar, introducing an international currency crisis dimension to our current headaches.

Well, if you did, then even if you were very, very worried about our current financial problems-- and I am-- you would still want to draw the line somewhere, and acknowledge that there is some point beyond which lowering the fed funds rate further will do more harm than good. When we've got that rate to 2.25%, and people are telling surveyors they are expecting 4.5% inflation, we need to be open to the possibility that we've already reached such a point.

I think the Fed missed an opportunity here. A 25 or a 50 basis point cut would have sent commodity prices crashing. Even the mildly hawkish surprise of "only" a 75 basis point cut may have some effects in that direction. If the Fed did convince the commodity speculators that their path leads only to ruin-- and I believe the Fed could easily have done just that-- that would leave Bernanke with a lot more maneuvering room to cope with what comes next. If the commodity demon were under control, maybe we'd have the breathing room later to bring the fed funds rate all the way down to 1%. While the speculation remains rampant, however, I expect to get nothing but trouble for the effort.

The Fed is firing its gun into the air. We may soon really wish we had some more ammunition.

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Anyone for coffee ??

Starbucks Chief Doesn't See U.S. Economy Improving This Year

By Josh Fineman and Tim Catts

March 19 (Bloomberg) -- Starbucks Corp. Chief Executive Officer Howard Schultz described the U.S. economy as being in a ``tailspin'' and said the company will introduce a new espresso machine with freshly ground beans at most U.S. locations to reverse a decline in customer visits.

Starbucks will also start selling energy drinks at its stores, Schultz said today at the its annual meeting. The coffee chain doesn't see the economy, which may be in a recession, improving this year, he said.

Who am I to argue?

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Anyone for coffee ??

Starbucks Chief Doesn't See U.S. Economy Improving This Year

By Josh Fineman and Tim Catts

March 19 (Bloomberg) -- Starbucks Corp. Chief Executive Officer Howard Schultz described the U.S. economy as being in a ``tailspin'' and said the company will introduce a new espresso machine with freshly ground beans at most U.S. locations to reverse a decline in customer visits.

Starbucks will also start selling energy drinks at its stores, Schultz said today at the its annual meeting. The coffee chain doesn't see the economy, which may be in a recession, improving this year, he said.

Who am I to argue?

They're gonna need more than a new espresso machine and energy drinks to squeeze any profits out of people who haven't got a pot to p1ss in.

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Econbrowser's thoughts:

If the commodity demon were under control, maybe we'd have the breathing room later to bring the fed funds rate all the way down to 1%. While the speculation remains rampant, however, I expect to get nothing but trouble for the effort.

The Fed is firing its gun into the air. We may soon really wish we had some more ammunition.

I suspect commods are the key to this one, with commods at present levels interest rate cuts are just compounding the inflation risk 6 months down the line.

When/IF commods break lower (much lower 2006 levels) then and only then is the crisis over and there will be a few more casualties along the way.

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  • 297 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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