At the Feds regularly scheduled FOMC (Federal Open Market Committee) meeting on June 25, 2008, the Fed left it's fed funds target rate at 2%, as widely expected. The Fed's statement indicated more concern over rising inflation and less concern over economic growth. The following url will lead to the actual statement on the Board of Governors website:
http://www.federalreserve.gov/newsevents/press/monetary/20080625a.htm
The Markets reaction to the statement was subdued as most participants anticipated that the Fed would stand pat on rates. An hour after the release of the statement, equities were off their highs and the treasuries have strengthened, sending their yields lower.
Only one Fed governor, Richard W. Fisher, voted in favor of raising the target rate. I think Mr. Fishers vote in favor of raising rates is indicative of the direction the Fed will likely go in the near future. It was probably too soon to raise rates at this meeting, but as we go forward, the need to raise rates will only increase, and the Markets will likely expect it.
Wednesday, June 25, 2008
Greenspan's Comments are laughable
The headlines blare out into the ether "Economy on brink of recession, Greenspan says".
http://www.reuters.com/article/businessNews/idUSJAT00371420080624?feedType=RSS&feedName=businessNews&rpc=23&sp=true
You might ask yourself why I say they are laughable. Well, well my friends of gloom and doom it was only a few short years ago that Alan Greenspan was the wizard of the goldilocks economy and he could do no wrong. I find it funny that the man at least on the surface of the situation most responsible for the structural problems he laments about says that he was responsible for nothing. (Please read excerpt from article in case you do not have time to read the link for the article above.)
Greenspan said he did not believe arguments that the housing problems in the U.S. were due to interest rates being too low during his tenure. "As far as I'm concerned, the data do not support it (that argument). The housing bubble is clearly an international phenomenon."
Hmmmm! Mr. Greenspan seems to forget that the USD had become the reserve currency of the world. It would allow lesser minds, such as mine, to assume that low interest rates on borrowing of the USD would help to fuel the speculation not only in housing in USA but in markets all over the world. Not to mention the practice of Wall Street buying up all sorts of paper and debt instruments. Then slicing, dicing, and repackaging them to sell in the open markets to friends and supposed foes alike. Ever ask yourself why there were buyers? Answer, because the good ol' USA was still seen as a Nation that looked like it knew what it was doing. The world had a begrudging respect for our business and financial institutions and people who ran them. To be simple about it. They trusted our leaders in business and finance knew what they were doing! Well Kiss that trust good bye, it went up in smoke with the housing and mortgage industries. We are now in uncharted territory. And unfortunately for Al he's the poster boy. He let the guests drink from the punch bowl long after the party should have ended.
I am not even going to try and delve into detail about the housing market in the United States and what caused this train wreck. Mr. Greenspan is just one culprit of many whom should have known better all the way down to the borrower who should have known they were living way beyond their means. We will save the vitriol for the remaining players in and around that industry for later posts. Suffice to say Greenspan only wants to be remembered for the good times. Unfortunately sometimes the good times are at the expense of others at a later date.
My only advice for Greenspan and his crowd of cheer leaders, albeit much smaller since he left office, are these words which at the moment I do not know who to give credit (possibly Mark Twain).
"When you take responsibility for the sunshine, you better be prepared to take the blame for the rain!"
Well Mr. Greenspan, it's raining.
Asland
http://www.reuters.com/article/businessNews/idUSJAT00371420080624?feedType=RSS&feedName=businessNews&rpc=23&sp=true
You might ask yourself why I say they are laughable. Well, well my friends of gloom and doom it was only a few short years ago that Alan Greenspan was the wizard of the goldilocks economy and he could do no wrong. I find it funny that the man at least on the surface of the situation most responsible for the structural problems he laments about says that he was responsible for nothing. (Please read excerpt from article in case you do not have time to read the link for the article above.)
Greenspan said he did not believe arguments that the housing problems in the U.S. were due to interest rates being too low during his tenure. "As far as I'm concerned, the data do not support it (that argument). The housing bubble is clearly an international phenomenon."
Hmmmm! Mr. Greenspan seems to forget that the USD had become the reserve currency of the world. It would allow lesser minds, such as mine, to assume that low interest rates on borrowing of the USD would help to fuel the speculation not only in housing in USA but in markets all over the world. Not to mention the practice of Wall Street buying up all sorts of paper and debt instruments. Then slicing, dicing, and repackaging them to sell in the open markets to friends and supposed foes alike. Ever ask yourself why there were buyers? Answer, because the good ol' USA was still seen as a Nation that looked like it knew what it was doing. The world had a begrudging respect for our business and financial institutions and people who ran them. To be simple about it. They trusted our leaders in business and finance knew what they were doing! Well Kiss that trust good bye, it went up in smoke with the housing and mortgage industries. We are now in uncharted territory. And unfortunately for Al he's the poster boy. He let the guests drink from the punch bowl long after the party should have ended.
I am not even going to try and delve into detail about the housing market in the United States and what caused this train wreck. Mr. Greenspan is just one culprit of many whom should have known better all the way down to the borrower who should have known they were living way beyond their means. We will save the vitriol for the remaining players in and around that industry for later posts. Suffice to say Greenspan only wants to be remembered for the good times. Unfortunately sometimes the good times are at the expense of others at a later date.
My only advice for Greenspan and his crowd of cheer leaders, albeit much smaller since he left office, are these words which at the moment I do not know who to give credit (possibly Mark Twain).
"When you take responsibility for the sunshine, you better be prepared to take the blame for the rain!"
Well Mr. Greenspan, it's raining.
Asland
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