Post by jeffolie on Aug 21, 2007 18:00:55 GMT -6
The Fed will start lowering interest rates. Based on the action of the Fed's lowering the discount rate when the equity markets began to freefall, I opine that the Fed will react to financial crisises and not proactively cut rates before the September meeting.
The results of the rate cuts will be expected and probably create at least a temporary bounce in the equity markets whenever the cuts actually happen.
The fed can not save the credit markets and has not changed the buyers strike against purchasing mortgage related financial instruments. These mortgage related instruments will collapse in value to the level that speculators are willing to buy them. The inability to raise funds through the sale of new mortgage related instruments will and already has started to collapse the housing market. What we have seen so far has been a mild price decline, this will accelerate over the next 3 months.
XMAS may be a diaster. No one will buy Chineese toys. The Fed will lower rates when XMAS sales become desparate but I doubt this will save consumer retail spending.
I opine that the Fed cannot prevent a recession from being well known by XMAS.
One matter complicating the Fed is the unwinding of the yen carry trade. The Fed has no control of this liquidity draining process from unfolding and impacting the financial community.
Another matter complicating the Fed is the redemptions at the end of the quarter from hedge funds. Again the Fed has no control over this liquidity draining process which will impact the financial community. Margin call on the leverage, loans made by investment banks will force liquidations and collapse some banks. The Fed will react.
The results of the rate cuts will be expected and probably create at least a temporary bounce in the equity markets whenever the cuts actually happen.
The fed can not save the credit markets and has not changed the buyers strike against purchasing mortgage related financial instruments. These mortgage related instruments will collapse in value to the level that speculators are willing to buy them. The inability to raise funds through the sale of new mortgage related instruments will and already has started to collapse the housing market. What we have seen so far has been a mild price decline, this will accelerate over the next 3 months.
XMAS may be a diaster. No one will buy Chineese toys. The Fed will lower rates when XMAS sales become desparate but I doubt this will save consumer retail spending.
I opine that the Fed cannot prevent a recession from being well known by XMAS.
One matter complicating the Fed is the unwinding of the yen carry trade. The Fed has no control of this liquidity draining process from unfolding and impacting the financial community.
Another matter complicating the Fed is the redemptions at the end of the quarter from hedge funds. Again the Fed has no control over this liquidity draining process which will impact the financial community. Margin call on the leverage, loans made by investment banks will force liquidations and collapse some banks. The Fed will react.