Tuesday 16 December 2008

Fed runs out of Ammo

The US has reduced its interest rate to 0.25% or less. The lowest it has ever been. A true test of monetary economic theory. Will it revive the economy? Will it actually kick-off yet another asset bubble ( in gold maybe..)?

The key question is, what do you do when you run out of ammo? What rocks is the Fed going to throw next?

15 comments:

  1. Direct rises in taxes and a massive cut in public spending.

    Painful but the only real way left for them to get their economy back on track.

    ReplyDelete
  2. Anonymous11:58 pm

    Get those presses going!

    ReplyDelete
  3. How will a rise in productivity punishments help the economy?

    ReplyDelete
  4. Anonymous10:11 am

    What Rocks?

    Quantitative easing.
    Devalue the currency.
    Possibly Loose reserve currency status.

    HSBC in far east now exited short gold position.
    GS, Bank of Nova Scotia, now taking bullion deliveries.
    China buying a few thousand tons, Russia in the hundreds, Saudi Arabia just spent $3.4Billion

    Go figure!

    Next step for UK is quantitative easing.

    ReplyDelete
  5. Uk very likley to follow this rouite from reading the minutes of the BOE today.

    What will it mean - huge commodity and precious metals rally.

    market rally.

    avoid cash at all costs.

    possible burn-out of the economy due to capital flight etc.

    Default?

    I wrote a couple of weeks ago about his wild strategy of quantitative easing. I was not really being serious - but lo it has come to pass.
    Whatever idiocy one tries to think up 'they' actually do it.
    We live in interesting times.

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  6. Anonymous3:15 pm

    "We live in interesting times"

    Indeed.

    Hope you are profiting from them.
    Gold is doing its job.
    Silver just starting.

    http://www.kitco.com/market/bp_charts.html

    Default?
    Difficult to default on own currency, devalue, - yes, - happening now.

    Tick tock tick....

    G7 nations will be on a race to the bottom.

    UK gold reserves? Everyone seems to be preparing except UK!

    Clowns

    Gold in backwardation on Comex, no-one coming forward with physical to help the shorts.

    Interesting times.

    ReplyDelete
  7. silver is my current bet; doing better than gold - more upside potential!

    ReplyDelete
  8. Anonymous9:01 pm

    Hope it is physical

    I have heaps of mistrust.

    Just saying, - not inquiring.

    If it's levered paper, watch for who provides the leverage.

    ReplyDelete
  9. Anonymous9:13 am

    Interesting times.

    I note today that Ambrose is discussing German problems again, it would seem not all is well in their much vaunted banking system, and this on the heels of a beggar-my-neighbour policy by German finance chief, also coming under Ambrose scrutiny

    A significant number of economists are beginning to question the wisdom of current "Save the World" bailouts.

    My own view is that they will not work, for many reasons.
    A significant global market crash in the first quarter 2009, but probably not the bottom.
    G7 looking at 10 years in the wilderness, next G13, probably 5 years.

    G20 upcoming in London is probaly the last chance for a co-ordinated global response, but the chance of that are almost as slim as the chances of applying the correct response. No politician at this stage will be prepared to abandon the status quo, thus the structures that brought us here will be further perpetuated.

    Pitchforks and flintlocks?

    ReplyDelete
  10. Anonymous10:11 am

    Have these guys never heard of the Yen carry trade?

    Imagine that you now take trillions of dollars in US debt at low interest rates and pour it into Euro accounts. $ falls like stone, Euro rises. EU collapses as trade grinds to a complete halt. No wonder riots are breaking out already.

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  11. Anonymous4:56 pm

    I hope we don't put it down to near 0% interest rates. Surely that would devalue the £ further?

    Especially when Trichet hinted than the €Zone may not cut their rates when they next meet.

    ReplyDelete
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    ReplyDelete