The AP headline goes like this:
"Sunday August 5, 6:01 pm ET
Smarting From Friday's Losses, Wall Street Awaits Rate Decision From Federal Reserve Officials"
the lead paragraph:
"NEW YORK (AP) -- With two weeks of volatility behind it, Wall Street faces the prospect of more turbulence -- unless the Federal Reserve comes to the rescue."
Comment:
Many financial commentators have said--as I have on this blog--that the Federal Reserve decision to lower interest rates cannot come "to the rescue" of Wall Street's predicament as credit markets tighten world-wide.
"Unless the Federal Reserve comes to the rescue" is highly misleading, as though AP could promise that if the Fed lowers interest rates, that Wall Street turbulence will subside.
So far, Bear Stearns is out $1.5 billion. The company has halted redemptions in a third hedge fund. Sowood Capital, out $450 million. A hedge fund in Australia and bank in Germany have gone down.
I'll keep a list... check back in. We're in the early minutes of what Nouriel Roubini calls, a "systemic risk episode". The Fed should let this one, play out.
3 comments:
"Coming to the rescue" by lowering interest rates would only accelerate the cratering of the U.S. dollar. As the dollar declines, the cost of imports, including oil, go up, OPEC decides to switch to the Euro, China decides to stop buying our government securities (which shrink in real terms with the dollar), and our ability to deficit spend evaporates. Eventually, neither consumers--through "borrowed equity"-- nor the government can deficit spend, real estate deflates, and you are going to have more than a "hard landing" recession. Anyone for warehouse space on the 50th floor with a view of the the bay and the AAA?
Here you can watch Rep. Barney Frank addresses some of the economic problems facing the US economy:
http://www.sharedprosperity.org/av/20070622.html
Here is a sampling of the issues facing middle class americans:
http://www.epi.org/
Here you can watch Rep. Barney Frank addresses some of the economic problems facing the US economy:
http://www.sharedprosperity.org/av/20070622.html
Here is a sampling of the issues facing middle class americans:
http://www.epi.org/
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