I can’t but help feel here we go again.
The fed seem to be no more than the puppets on Wall streets strings and thus we are entering bubble number three (first was tech stocks, second was housing stocks, third seems to be banking and or hedgefund stocks …I cant make any sense of what Bernake really is trying to help here) and to hell with the global economy.
Comical Austin’s guts aside, i feel Bertie and his suicide cult have suddenly got a life line and it going to be another few years before Global Inc starts to have to pay back its debts.
My question here is, are Irish banks going to be able to get access to cheaper credit again, and thus start lending recklessly again?
Apart from pinsters, I fear that most Joe or Jane public’s will still pay whatever the bank will lend them for a shoebox in Ballybackofbeyond.
Does Bernake’s printing press mean we are about to enter bubble 3 (the mother of all bubbles) before the mother of all bursts when it all goes Japanese and there is no more interest cuts possible when rates hit 0% and there is no more tree’s to feed into the us dollar printing presses?
Nope, I think this is the big bust.
If you look at it this way - those new guys in charge of Bear Sterns, Citi, Merrill etc have just watched their predecessors get the chop for being too extravagant. Now put it in a human context - how would you play it in their shoes? What mandate do you think they’ve been given by their boards?
Their job now is to try and rebuild their capital bases and limit the losses of their predecessors making. For some (Citi?), just keeping the bank solvent will be considered a success.
Nope, no more bubbles here - the US is going Japanese!
In the US, at least it will be rational to load up the debt again.
Real interest rates will be strongly negative.
People, however, are not rational utility maximisers. It will be harder to get a loan, so less people will try.
Inflation will probably not drop off as much as expected, given China is no longer acting as a deflationary source in the world economy.
If you’re looking to park your cash somewhere, services to help the increasing aged population would be my suggestion.
I would have thought that the actions of the Fed would do no more than send out a signal that all is not well in the US economy. They obviously have access to data that the rest of us dont and based on that data they would appear to have decided that the US economy is heading into an oncoming shitstorm and have acted accordingly. They didnt even wait until next week, when they were scheduled to meet, to cut the rate. If I was an investor I would be wondering what do they know that I dont which has precipitated the cut. At least after 9/11 people knew why the Fed acted in the way that they did. Remember as well that the mortgage mess is still unwinding stateside with apparently up to two million people at risk of losing their homes as a result of upcoming resets on their subprime mortgages. If the Feds job is to instill confidence in the economy I would have thought that actions such as those taken yesterday are a very poor way of doing so.