Rates cuts are coming! It's June 25, 2003 - Page 9

**limerickman** · #**121** 10-14.-2008

The blame game started in earnest.

One side accusing t'other.

Root cause in all of this is : Alan Greenspam.

His insistence on lowering interest rates, his advocacy of de-regulation, his advocacy of "light touch regulation" and the Reserves policy of allowing the capital markets to do as they pleased, is the root cause of the US financial woes.

If Greenspam had ensured that capital was not as cheap and as accessible through higher interest rates and through more regulation of the market, loans and capital would not have been extended to people who had no means of being able to service those loans.

Yes, the people who took out loans that they could not afford to repay were culpable.
Yes, the banks who gave loans to people who could not afford to repay were culpable.
Yes, the banks who bought those loans as securitised "assets" were also culpable.

Greenspam created the conditions that allowed all of this and more to take place.

**jhuskey** · #**122** 10-14.-2008

Quote:

Originally Posted by limerickman

The blame game started in earnest.

One side accusing t'other.

Root cause in all of this is : Alan Greenspam.

His insistence on lowering interest rates, his advocacy of de-regulation, his advocacy of "light touch regulation" and the Reserves policy of allowing the capital markets to do as they pleased, is the root cause of the US financial woes.

If Greenspam had ensured that capital was not as cheap and as accessible through higher interest rates and through more regulation of the market, loans and capital would not have been extended to people who had no means of being able to service those loans.

Yes, the people who took out loans that they could not afford to repay were culpable.
Yes, the banks who gave loans to people who could not afford to repay were culpable.
Yes, the banks who bought those loans as securitised "assets" were also culpable.

Greenspam created the conditions that allowed all of this and more to take place.

He had help!

**limerickman** · #**123** 10-30.-2008

Fed Interest rate dropped down to 1% yesterday.

Fed statement said that the US economy had slowed dramatically.
The Feds statement yesterday about the US economy struck me as puzzling to say the least.
To only concede that the US economy was in trouble, yesterday, seems strange.

The US budget deficit has been growing since 2001.
The US trade deficit has been growing since 2001.
Net US job losses have grown since 2004.
And the policy of deliberately depreciating the dollar has not helped.
Foreign holdings of US currency have grown rapidly since early this decade.
If those dollars start to migrate back to the US, oh dear, oh dear.

I have a lot of sympathy for Bernie.
He's left to do the janitors duties after Mr Greenspam and his failed policies.

Meanwhile Bank of England interest rate = 4.5%
ECB rate = 3.75%.

parawolf · #**124** 10-30.-2008

Quote:

Originally Posted by limerickman

Fed Interest rate dropped down to 1% yesterday.

Fed statement said that the US economy had slowed dramatically.
The Feds statement yesterday about the US economy struck me as puzzling to say the least.
To only concede that the US economy was in trouble, yesterday, seems strange.

The US budget deficit has been growing since 2001.
The US trade deficit has been growing since 2001.
Net US job losses have grown since 2004.
And the policy of deliberately depreciating the dollar has not helped.
Foreign holdings of US currency have grown rapidly since early this decade.
If those dollars start to migrate back to the US, oh dear, oh dear.

I have a lot of sympathy for Bernie.
He's left to do the janitors duties after Mr Greenspam and his failed policies.

Meanwhile Bank of England interest rate = 4.5%
ECB rate = 3.75%.

Reserve Bank of Australia cash interest rate = 6.5%, and that has been cut over the past 2 months from 8.0% and has been even higher.

**limerickman** · #**125** 10-30.-2008

Quote:

Originally Posted by parawolf

Reserve Bank of Australia cash interest rate = 6.5%, and that has been cut over the past 2 months from 8.0% and has been even higher.

ECB rate increased from 4.0% to 4.25% in mid 2008.
ECB rate had actually increased from late 2006 up to 4.0% level.

Granted the ECB did drop their interest rate by 0.5% in October 08.

**limerickman** · #**126** 11-28.-2008

Now that EU inflation is downward, the ECB, correctly in my opinion, looks like it will drop interest rates now that the EU inflation rate is finally moving downward.

http://www.ft.com/cms/s/a492ab28-bd4....com%2Fmarkets

**limerickman** · #**127** 12-04.-2008

Yep, inflation in Europe has dropped significantly and the ECB, correctly, has lowered interest rates today by 75 basis points.
Good decision,

**limerickman** · #**128** 12-05.-2008

Jean-Claude Trichet, President of the ECB,
Lucas Papademos, Vice-President of the ECB
Brussels, 4 December 2008

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference here in Brussels.
I would like to thank Governor Quaden for his kind hospitality and to express our special gratitude to his staff for the excellent organisation of the meeting of the Governing Council.

We will now report on the outcome of today’s meeting, which was also attended by Mrs Lagarde, President of the ECOFIN Council, and Commissioner Almunia.

On the basis of its regular economic and monetary analyses, the Governing Council decided to reduce the key ECB interest rates by a further 75 basis points.

This step follows the two 50-basis point reductions in the key ECB interest rates announced on 8 October and 6 November 2008.
Overall, since our last meeting, the evidence that inflationary pressures are diminishing further has increased and, looking forward, inflation rates are expected to be in line with price stability over the policy-relevant horizon, supporting the purchasing power of incomes and savings.
The decline in inflation rates is due mainly to the fall in commodity prices and the significant slowdown in economic activity. Largely related to the effects of the intensification and broadening of the financial turmoil, both global demand and euro area demand are likely to be dampened for a protracted period of time.
At the same time, while the underlying pace of monetary expansion has remained strong, it has continued to decelerate further.
All in all, the level of uncertainty remains exceptionally high.
The Governing Council will continue to keep inflation expectations firmly anchored in line with its medium-term objective.
In so doing, it supports sustainable growth and employment and contributes to financial stability.
Accordingly, we will continue to monitor very closely all developments over the period ahead.

**limerickman** · #**129** 12-05.-2008

Basket case.

Wall St pessimistic on dire jobs numbers
By Alistair Gray in New York

Published: December 5 2008 13:52 | Last updated: December 5 2008 13:52

Wall Street stocks were set for a sharply lower start on Friday after a dire reading of US employment shocked traders.

Futures took a turn for the worse after closely-watched Labor Department figures showed employers outside the agricultural sector slashed payrolls by 533,000 last month, the deepest contraction since December 1974 and much worse than expected.

The market sold-off sharply in the final hour of the previous session as traders positioned themselves ahead of the report, but the figures on Friday morning were worse than even the most bearish predictions.

Median forecasts had indicated a decline of 335,000, according to Bloomberg data, although some analysts forecast a loss in excess of 400,000. The data reinforced fears that the yearlong recession was worsening.

“Dire. The November employment report was staggeringly poor, even for a market increasingly inured to ugly data,” said Alan Ruskin, analyst at RBS. “There are simply no redeeming features in this data. Weakness is evident everywhere.”

However, he added: ”There is some feeling that at least in terms of the speed of the descent, the economy may be close to its weakest point. This and the obvious limited investor appetite to take risk is restraining the reaction to data.”

**limerickman** · #**130** 01-06.-2009

Indeed

**limerickman** · #**131** 01-06.-2009

Just watching the US interest rate, the ever depreciating dollar - a flight to safety would seem to be on the cards.

The EURO is appreciating strongly on the currency markets.
EURO value appreciation is weighted more toward to the weakness of the dollar and sterling, rather than an inherent EURO strength.

It might just be the case that the ultimate safe haven in all of this - could well be gold.

Watch that commodity price.

**limerickman** · #**132** 01-15.-2009

ECB cuts it's interest rate today.

The inflation rate, which is the centrepiece of the ECB's (and BOE's) interest rate strategy, as pointed out here in August 2007, has fallen in the last few months.

Jan. 15 (Bloomberg) -- The European Central Bank cut its benchmark interest rate by half a percentage point to 2 percent, matching a record low, as the deepening recession pressed policy makers into action.

The reduction, the fourth in as many months, was in line with the median forecast of 60 economists in a Bloomberg News survey.
The rate was last at this level between 2003 and 2005. The Frankfurt-based central bank, which took charge of monetary policy in 1999, will reduce the benchmark to 1.5 percent in March, another survey of economists shows.

President Jean-Claude Trichet said last month there’s a limit to how far the ECB can cut rates and refused to give any signal for January, suggesting he favored a pause.
At the same time, the economy of the 16 euro nations is deteriorating more rapidly than the ECB anticipated as the global financial crisis hurts exports, damps spending and threatens credit ratings in the region.

“The ECB really had little option but to act again given the clear, widespread evidence that the euro-zone recession is deepening,” said Howard Archer, chief European economist at IHS Global Insight in London. “We suspect that the ECB will trim interest rates further in February and bring them down to 1 percent by mid-2009.”

The euro dropped almost a cent to $1.3087 after the decision. Trichet holds a press conference at 2:30 p.m.

Lagging The Fed

The ECB still has the highest rates among the Group of Seven industrialized nations. The U.S. Federal Reserve, the Bank of England and the Swiss central bank have cut borrowing costs more aggressively as the world’s largest economies slide simultaneously into recession for the first time since World War II.

The Bank of England on Jan. 8 reduced its main lending rate to 1.5 percent, the lowest since it was founded in 1694. The Fed last month lowered its key rate to a target range of zero to 0.25 percent. Japanese and Swiss rates are also close to zero. Canada’s rate is at 1.5 percent.

The ECB has reduced its benchmark by 225 basis points since early October. Last month it lowered the rate by 75 points, its biggest step ever.

Trichet told journalists on Dec. 15 the bank was focused on making sure its easing to date flowed through to the economy. It wanted to avoid being “trapped” with rates that are “too low,” he said. Executive Board member Juergen Stark said on Dec. 10 the scope for further moves was “very limited.”

Credit Rating Cut

The faltering economy is hurting budgets in some euro-region countries. Standard & Poor’s yesterday lowered Greece’s sovereign credit rating one notch to A-, saying the financial crisis has “exacerbated an underlying loss of competitiveness.”

European confidence has plunged to the lowest on record, industrial production posted it biggest annual drop in 18 years in November and unemployment rose to 7.8 percent in November, a two- year high.

The German economy, Europe’s largest, may have contracted as much as 2 percent in the fourth quarter, the country’s statistics office said yesterday. That would be the biggest slump in more than two decades.

“Economic data has been catastrophic,” said Karsten Junius, senior economist at Dekabank in Frankfurt and co-author of a book on the ECB. If policy makers had cut interest rates by 25 basis points or left them unchanged, “they would have made fools of themselves.”

Slower Inflation

Some council members had signaled a willingness to lower borrowing costs further. ECB Vice President Lucas Papademos and Portugal’s Vitor Constancio both said this month that lower rates may be warranted if the inflation rate drops too far below 2 percent, the bank’s definition of price stability.

The rate declined to 1.6 percent in December.

The ECB last month forecast inflation would average 1.4 percent this year and 1.8 percent in 2010. It predicted the economy would contract 0.5 percent in 2009 before rebounding to expand 1 percent in 2010.

“Risks to the economic forecasts are not only to the downside, they’re also increasing,” said Nick Kounis, chief European economist at Fortis in Amsterdam. Trichet “needs to recognize that in the press conference.”

The shadow ECB council, a group of economists that monitors the central bank, said on Jan. 13 that a half-point reduction in rates may not be enough and called for a full percentage point cut. A worsening recession increases the risk of “excessive disinflation,” and this should be as much a concern to the ECB as inflation above its target, the economists said.

And the FT reports :

http://www.ft.com/cms/s/0/0f1cc64c-e2f5-11dd-a5cf-0000779fd2ac.html

At the same time, eurozone inflation has dropped rapidly. Ahead of the ECB’s announcement, December’s inflation rate was confirmed at 1.6 per cent – the lowest for more than two years.

The ECB is more concerned about longer-term inflation trends.
Unlike in the US, financial markets have not priced in deflation in the eurozone – but they do expect inflation to be weak for some time.

The ECB aims to keep the annual eurozone inflation rate “below but close” to 2 per cent.
On average last year, eurozone inflation was 3.3 per cent – by far the worst year since the launch of the euro in 1999

**limerickman** · #**133** 02-10.-2009

Quote:

Originally Posted by limerickman

Just watching the US interest rate, the ever depreciating dollar - a flight to safety would seem to be on the cards.

The EURO is appreciating strongly on the currency markets.
EURO value appreciation is weighted more toward to the weakness of the dollar and sterling, rather than an inherent EURO strength.

It might just be the case that the ultimate safe haven in all of this - could well be gold.

Watch that commodity price.

Unlike several vague and plainly wrong predictions made here by others, it looks like the prediction I made about GOLD prices and the rush to safety three weeks ago is coming to fruition.

FT published this today :

http://www.ft.com/cms/s/0/359da604-f6d4-11dd-8a1f-0000779fd2ac.html

Bullion sales hit record in rush to safety
By Javier Blas in London
Published: February 9 2009 18:16 | Last updated: February 9 2009 18:16

Investors are buying record amounts of gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system.

The US Mint sold 92,000 ounces of its popular American Eagle coin last month, almost four times that which it sold a year ago and more than it shipped during the whole of the first half of 2007.

Other countries’ mints have also reported strong sales.
“Large purchases of coins are perhaps the ultimate sign of safe-haven gold buying,” said John Reade, a precious metals strategist at UBS.
Inflows into gold-backed exchange traded funds surged in January, pushing their bullion holdings to an all-time high of 1,317 tonnes. Last month’s flows of 105 tonnes were above September’s previous record of 104 tonnes, and absorbed about half the world’s gold mine output for January, said Barclays Capital.

“We estimate that investment demand [into gold] could double in 2009 compared to 2007,” said Mr Reade.
“Purchases of physical gold have jumped over the past six months as investors’ fears about the current financial crisis ... have intensified.”

The move into gold is being driven by the very rich, with bankers saying that some clients are hoarding gold in their vaults. UBS and Goldman Sachs said last week that investor hoarding would drive prices back above $1,000 an ounce.
On Monday gold was trading at $892 an ounce.
Traders and analysts said jewellery demand, historically the backbone of gold consumption, had collapsed under the weight of the high prices. Sharp falls in demand in the key markets of India, Turkey and the Middle East have capped the potential of any price rally. But the lack of jewellery demand has not discouraged investors.

Jonathan Spall, director of commodities at Barclays Capital in London, said: “We have seen more new enquiries about investing in gold so far this year than during the whole 2008.”

Philip Klapwijk, chairman of GFMS, the precious metal consultancy, said that investors were buying gold because of fears about the global financial system rather than looking for a quick gain.
“This is a new round of safe haven buying,” Mr Klapwijk said.
GFMS estimated bullion coin demand last year reached its highest level in 21 years.

**limerickman** · #**134** 02-18.-2009

Alan Greenbum changes his stance.

Privatise the profits but plead to the State with the begging bowl when times get tough.

http://www.ft.com/cms/s/0/e310cbf6-f...nclick_check=1

Greenspan backs bank nationalisation
By Krishna Guha and Edward Luce in Washington
Published: February 18 2009 00:06 | Last updated: February 18 2009 00:06

The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times.

In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.

”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”
Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.

“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”

Speaking to the FT ahead of a speech to the Economic Club of New York on Tuesday, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.
The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”
But he cautioned that holders of senior debt – bonds that would be paid off before other claims – might have to be protected even in the event of nationalisation.
”You would have to be very careful about imposing any loss on senior creditors of any bank taken under government control because it could impact the senior debt of all other banks,” he said. “This is a credit crisis and it is essential to preserve an anchor for the financing of the system. That anchor is the senior debt.”

Mr Greenspan’s comments came as President Barack Obama signed into law the $787bn fiscal stimulus in Denver, Colorado. Mr Obama will announce on Wednesday a $50bn programme for home foreclosure relief in Phoenix, Arizona. Meanwhile, the White House was working last night on the latest phase of the bailout for two of the big three US carmakers.

In his speech after signing the stimulus, which he called the “most sweeping recovery package in our history”, Mr Obama set out a vertiginous timetable of federal decisions in the coming weeks that included fixing the US banking system, submission next week of the 2009 budget and a bipartisan White House meeting to address longer-term fiscal discipline.
“We need to end a culture where we ignore problems until they become full-blown crises,” said Mr Obama. “Today does not mark the end of our economic troubles… but it does mark the beginning of the end.”

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