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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sun Mar 11, 2007 5:19 pm Post subject: Fed Signaling Future US Interest Rate Cuts - Gold to benefit |
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In a series of public messages, the US Federal Reserve has issued some statements recently which telegraph an increasingly likely official interest rate cut. These guys will cut rates, but only when kicking and screaming, since they have displayed extreme reluctance at every opportunity.
They know the damage to the US Dollar certain to follow. They speak through their usual mouthpieces, but this time with the added impact of Sir Alan Greenspan, serial bubble engineer extraordinaire. One must connect the dots, a task now routine among my methods, putting to practice the motto “think like a thief” in order to properly gauge the enemy. Why? Because the integrity of the US financial system, economic management, and leadership is as low as a snake's belly slithering in the grass.
The US Fed will not suddenly reverse course and cut rates. They do so slowly, deliberately, and usually very late in the game. They lay the groundwork for a change in monetary direction, as in hiking or cutting rates. They have yet to change their position bias, having in recent months moved to neutral, with constant banter on an inflation threat. In my opinion, their stated inflation threat is a disguised US Dollar threat. They wish not to shock the financial markets. Their stodgy and consistent poor judgment earns them the accusation and charge of incompetence. They are chronically slow in recognizing the best time to take action, to avoid economic and banking system damage, to properly manage the economy. They are the Western world Politburo, only their board members are wet behind the ears with inexperience, instead of geriatric fuddy duddy ideologue clowns. Don't get me wrong, these guys of ours are ideological clowns of a different order, that dogma being of the debt based system, the floating currency system, the financial securities supermarket wholly dependent upon a raft of falsified statistics. Increasingly the system of governance and aggregate management has been blurred with the likes of giant corporations. They have become so engrained into the management, that neither integrity nor fair market can even remotely be used to describe that system.
BERNANKE
In a speech at Stanford University on March 2nd, US Fed Chairman Ben Bernanke made a couple interesting yet telling comments. First, he assessed the globalization impact. He claimed the effects of cheaper manufactured products from Asia are offset by higher energy & commodity prices. When considered together, he sees little basis for any conclusion that globalization has reduced price inflation inside the US Economy. Agreed fully here. He went on to make a silly claim that global factors have not “materially affected the ability” of the US Fed to influence financial conditions. How absurd a notion!! Every time Asian or Mid East nations threaten to sell UST Bonds, or actually sell UST Bonds, minor shock waves hit high level financial markets, notably the currency and bond markets. Global factors obviously are more pronounced nowadays. If not for the recycle of Asian trade surpluses, the US Fed would not have to deal with an inverted Treasury yield curve. That inversion is the bane to lending institutions, and a hindrance to monetary policy. Dumb statement, Ben, earning a “C” grade at Princeton University.
It was his second comment which caught my attention, as he believes USGovt data overstates price inflation. Try not to laugh. “I still think that there is still some overstatement, and Federal Reserve estimates are, depending on the indicator, somewhere between half a percent and percentage point of overstatement on the inflation rate.” He made another citation to the substitution concept, that consumers will purchase different goods when prices rise. This concept as well as quality improvements are the cornerstones to fraudulent CPI statistics dating back to their origins during the Clinton Administration. Perhaps we are to be treated to a new CPI revision in its formula calculation? Hey Ben, check out the employment cost index cited with 4Q2006 productivity. The ECI rose by 6.6% in Q4 to ring alarm bells. The real CPI is closer to 8% than 4% in my book.
The importance of his price inflation comment should not be lost. When the Bank of Japan assisted in the revision to their CPI last summer, the 0.5% reduction in stated CPI provided the BOJ with the necessary political interference (from fraud cloud cover) to hold back on an interest rate increase. In the United States, one might conclude that Bernanke is attempting to lay the groundwork for an interest rate cut this year. He might be alarmed by the housing market as a drag on consumers, and shocked by the mortgage finance industry as a cancer on the banking sector. Last month during a Senate testimony, his only words of caution were directed at the mortgage industry, which were worth watching closely, according to his view. Gold investors should pay heed to Ben's words on price inflation being exaggerated. Of course, the CPI is 4% to 5% lower than the real world in which we live.
http://www.marketoracle.co.uk/Article487.html |
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