Maggie's Farm

I like him --core inflation is worrisome, and it's the cruelest tax, regressive and valueless.

Everybody wants the discount rate cut, but most likely, the Dollar will have to firm a bit, and absorb more of the liquidity created by the recession/911 delation stimulus, and/or the subprime problem will have to grow more than it lately appears that it will, before he cuts rates.

And I agree with the (non) action, because the last thing we need (because monetary inflation is in the data) is to let the 'perception' get started that we want growth so badly that we won't defend the Dollar, Such a perception will drive up long bond rates (incl mortgage rates). This action will drive down the stock and bond markets, which have for the longest time been behaving wonderfully well (Greenspan's "conundrum"), due to heavy demand created in part by confidence that G'span/Bernanke era inflations will be dealt with too early rather than too late.

The nature of the data--lagging indicators looking backwards--requires luck for prescriptive perfection (that is, to adjust, or not adjust, the discount rate neither too early NOR too late).

Lots of folks agree with you--on the premise that commodities & gold are high--and more importantly highly diverged from history re long bond rates--due to the unprecedented power of the global demand boom (esp China/India) rather than, as in the past, to monetary inflation.

OTOH, tho, this "Black Swan" notion is interesting (bell curve vs power law), and seems to me to be a vote for Fed caution re further 'easy' money, for the time being, on the premise that current risk premiums re exogenous events (esp terrorism in the oil mkts) are not well-priced and so the Fed needs to keep its big weapon (large rate cuts) in ready reserve:

http://opinionjournal.com/la/?id=110009979

If we cut now in order to amp growth, and to ease the pressure on subprimes, then we couldn't get the full effect of a stimulus if, say, those 172 just-stopped AQ had managed to decapitate the gov't of Saudi Arabia, AKA the gov't of the OPEC swing producer, price-stabilizer, and owner of almost a third of global proven reserves.

Folks forget that a governmental decapitation is what 911 intended. The intent was to demolish the executive, military, and financial headquarters of the nation.

Lord Almighty, there is a lot going on in this world.

True, but countercurrents exist--March was crappy weather (some say enough to account for that Q1 dip), and consumer confidence numbers were strong (esp considering the watt-to-wall 'subprime disaster' media coverage). Bank of Japan may be key to a rate cut near term--if it signals intent to go up that next .25, then Dollar won't just be weak against Euro, but Yen, too.

Wonder how the Dems will play that avalanch of tax recpts. That one-day record recently collected a big yawn. They have to do something to this economy pretty quick, or let too many voters get a financial leg-up in the world.

Not only is his name Rufus, but he hail from Mississippi --don't THAT take the cake (a "buddy" from Louisiana & Texas can say that).

The Yen factor, to me (not talking about the 'carry-trade'), is covering the Dollar slide as a case of Euro strength rather than a Dollar weakness per-se. And it's working, as per the stable long rate even with the greenback skid.

But you're dead right--small business borrows short, and 5+ hurts. OTOH, local customers have the lower than usual mortgage rates, releasing more disposable income into trade. High short debt shrinks margins, but customer cash raises demand, and volume makes up the cash flow--which in the end is what small business gotta run positive all the time. i know, broad strokes there--

anon, try shutting down for a few minutes, and re-starting your puter. That's the first step. the hammer is way on down there, at step 2.

Rufus, maybe the Fed only knows what 'too far' is after it goes too far. and gets a growth or even an actual recession. How else can it know? If it had to cool the real-estate price boom (tho in your argument's favor, 'affordibility' would have eventually worked as well on all but the gamblers).

Gold, too, and copper--the whole basket--has to scare you silluy if uyou're Bernanke--as, when is this parabolic growth gonna stop? What if the system goes weird on me? Can i get outta town unrecognized?

hey, i inveneted a noo wa to spel!

Export surge --weak greenback, but also, we make good stuff except for the dang cars--which ain't really bad except for the huge chunk of the purchase price that goes to keep union bosses rich enough to pay Democrats to attack global trade so as to keep freedom from interrupting the flow of cash that keeps them rich enough to...oh shit, stuck in a loop loop loop

I couldn't agree more--virgin in volcano is perfect. After all, he's the Chairman of the United States Federal Reserve Board of Governors, not Evil Kneival or Amarillo Slim.

yeah, but you dint get no patton protection, so it air in the publik duh main.

Rufus posts a lot over at Larry Kudlow's blog, if you want to read more of his good-humor & perspicacious economical observationisms.

http://www.kudlowsmoneypolitics.blogspot.com/

Luther, your 'more circumspect' might be already in play, as he was no doubt pretty embarrassed over his shake-down cruise.

Especially that interview with Maria Barteromo (sp?), where a little verbal flourish accidentally moved the markets the next day.

I think he has learned. His last few testimonies to congressional committees were models of how to tame the wild DC Posturing Loonus species.

Coyote blog has some nice ways to savvy what the dickens the balance of trade account really accounts.

www.coyoteblog.com/coyote_blog/2005/12/a_trade_deficit.html

www.coyoteblog.com/coyote_blog/2006/04/ill_try_again_w.html

Suffice to say, the Dem howling over the trade deficit is just more propaganda--we've run a trade deficit forever, meanwhile becoming the world's economic engine, and creating the highest living standards. Dems always want to quote the numbers, which always grow in a growing economy, when if they were honest, they would quote the relevant ratios. Basic accounting.

"The HIGHEST BUDGET DEFICIT IN HISTORY" is actually an historical low-normal percentage of the GDP.

The problem we DO have, out-year entitlements for the massive boomer cohort, is the one economic issue they DON'T demagogue.

In fact, they barely mention it, other than to applaud themselves for stopping Bush's every effort to save our entire financial system from a future purchasing-power bust (either thru BIG tax hikes on the younger generation, or by cheating and just inflating the currency).

...neither of which will work. The youngsters are already in pre-tax-revolt mode (and good for them), and the old printing press solution, where fiat money and inflation & high interest rates used to have a little lag time where a given gov't could buy itself a little time (to maybe get outta town, if an election year), just ain't gonna work anymore.

The rubes have caught on.

Their black-box trading is lightning fast, and hair trigger, now. That's one thing Jimmy Carter did for us--taught us--by tragedy--to stay hyper alert to what Leviathan is up to.