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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (29346)	3/25/2005 12:46:50 AM
From: mishedlo	Read Replies (2) \| Respond to of 110191

If You Think Higher Interest Rates Will Help the Dollar, Think Again! gold-eagle.com FWIW I disagree If everything he says happens I could easily envision a higher dollar. It all depends on the FED's response to what he is saying. In general, however I think most of what he says will happen. Mish

To: orkrious who wrote (29346)	3/25/2005 9:03:10 AM
From: russwinter	Respond to of 110191

This Schiff commentary is an important piece. Again, the fate of the USD will depend on the Fed's and US Treasury response to the fallout from "normalizing" rates and reducing liquidity injections. Right now the actions as I've been tracking suggests that the money printing is being cooled off post Dec. 8th. So for three and a half months the Fed has engaged in a credible USD defense, while as before their policies (mostly Ministry of Propaganda shenanigans) were killing the USD. If they bring Uncle Ernie back out at the first sign of trouble however, the USD will swoon, it's that simple in my view. The test of this new found Uncle Ernie in the closet persona is soon at hand. Consumer and HELOCs lending since the beginning of the year has turned basically flat, federalreserve.gov federalreserve.gov and consumer confidence has suddenly plunged, rasmussenreports.com bank deposits are no longer growing, federalreserve.gov YOY steel and auto production is falling off, Feb inbound shipments into the three big California ports was 601,645 vs 615,181 in January. The thing that's missing so far is credit seizure, and a big widening of credit spreads. We've only seen that at the margins (GM), and I think that's because the Pig Men with their four football fields size trading floors still have incentives to speculate. The consumer may be tapped, but rates are still too far below inflation for Bully and Pig Men not to mobilize credit to buy everything from oil to junk bonds.

To: orkrious who wrote (29346)	3/28/2005 4:25:13 PM
From: yard_man	Read Replies (1) \| Respond to of 110191

these are not internally consistent-- that is 2 and the others: Higher interest rates will not result in even more borrowing -- nuts -- it will result in less borrowing and more funds to service existing variable rate debts => less consumption => improvement of the import side of the trade deficit (i.e. a reduction of imports). Collapsing housing will bring even more pressure to bear AGAINST increasing imports. >>2) Exacerbate America's "Twin Deficits" - Due to the short-term nature of Americas outstanding debt instruments, higher interest rates will increase both the budget and current account deficits, as higher interest payments are required to service maturing debts. Also, the recession itself will add to the deficit, resulting in even more borrowing at even higher interest rates. 3) Collapse the housing, stock, and bond market bubbles - Asset bubbles depend on low interest rates and continued speculation to sustain their inflated prices. When the bubbles burst, the shockwaves will reverberate throughout the entire economy. Individual household net worth's will be turned upside down, with reverse-wealth effects restraining consumption for years to come. The entire financial system will be at risk, as asset prices fall too low to secure the debts they currently collateralize. In addition, as the cost of servicing those debts grows, an increasing amount will default, exerting further downward pressure on prices. 4) Cause millions to lose their jobs - Since the majority of American workers depend on the discretionary spending of other Americans, millions will be unemployed. Especially hard hit will be mortgage and consumer finance, home building, real estate sales, financial services, travel, entertainment, and retailing. In other words, just about every American.<<