3SOF

We all know about "runs on the bank" ,which Bernarke can handle...What about "runs on the hedge fund"  Fourth quarter will see  pension funds and institutional investors  line up to withdraw from hedge funds , as withdrawals are highly restricted...If Bernarke LOWERS THE PRIME TO 4.75%, the dollar is weakened,imports and mortgages will cost more, further causing bumps up in ARM mortgages and increasing foreclosures...The FED is caught between a rock and a hard place....

September promises to be a brighter day,with the Fed likely to grant the panic stricken financial markets a cosmetic 1/4 point reduction in the prime...The markets will over react and go up...However,come October the financial institutions and some hedge funds will disclose their losses for the third  quarter...The reality will be worse than the panic...The markets will again over react in October and go way down...When the government says everything is fine,be afraid,be very afraid....

Citigroup economists predict the yen will strengthen to 105 yen to the us dollar by years end...The yen carry trade boosted worldwide markets with up to $1 trillion in liquidity...The 105 yen means the end of the carry trade,which forces worldwide sell offs of assets...Bernarke will be hard pressed to pick up the one trillion  slack in liquidity...

Central Banks worldwide printed $500 billion in currency to buy questionable mortgage backed securities...Now sub-prime fever has infected the "commercial ( corporate) paper market"...In the last 3 weeks,$250 billion was not rolled over,out of a total US commercial paper market of $2.2 trillion...Lenders are afraid to extend credit, and loans from the FED offer no solace...Bernanke will need to act quickly to have the FED PURCHASE more questionable assets...This is the only way he can unfreeze this  part of the credit market...A trillion here and a trillion there of printing more fiat currency,and we may see the value of the US dollar equal to the Mexican Peso...I wonder what other sections of our $500 trillion house of cards (i.e. derivatives) will need Super Ben to rescue them???  My best guess s the Hedge Funds will need a "hand" from gentle Ben...

Is the price of oil and gold going up,or is the value of the US dollar going down??? That is the question....

Jim Cramer,Bill Gross,and Steve Forbes may whimper and petulantly criticize the Fed and recommend a 1% drop in the lending rate,but they should be thankful to see a 1/4%...Sometimes the recommended cure causes more harm than the disease...Perhaps America should resign itself to economic hard times as a cyclical reality...

Excessive cuts in the Feds lending rate would result in a giant sucking sound of foreign capital out of US assets and Treasuries...The value of the US dollar would fall and in the end, interest rates on loans would paradoxically increase..."Hyper-stagflation" would be a new economic term as inflation soars over the sinking dollar....I believe the Fed decided the US markets will be the sacrificial lamb to the global economy and to maintain a modicum of credibility in the US dollar...Bernanke cannot save us from a tired,dying bull market or an overdue recession,without risking serious  inflation...At best,he may prevent a collapse of our currency...The real estate bubble that his predecessor helped create,has burst and it is spiraling down...There is no saving it until it reaches a natural equilibrium...The credit markets will show their bleeding wounds , beginning next month with quarterly stock reports and exits from hedge funds...

The economy can recover AFTER 2008 if this impending recession is handled wisely by the Fed and our government...A short term recession is no ones fault, but as natural as the changes of seasons...     

Quickly rising price of gold and Euros suggest the Fed overdid the lending rate cut to 1/2%...Bernanke created inflation today...

I was fundamentally wrong about Ben Bernanke...He has chosen the US dollar to be the sacrificial lamb to the markets...The USDX is dangerously  close to the all time low closing  of  78.33  achieved on 9/1/92...If it breaks down below that there is NO support below, and a correction to 55.00 is possible....That scenario guarantees the giant sucking sound of foreign capital out of American assets and US Treasuries resulting in double digit inflation...Other countries have not yet stepped in to relieve the pressure on the US dollar by decreasing their interest rates...

The Fed took this action to preserve the interests of its employers---the Banks and Hedge Fund crowd...The citizens are caught with the short end of the stick again...For Bernanke to risk a political backlash that could result in the death of the Federal Reserve System, I fear that the crisis in the debt markets is far more severe than we are told...The secrecy will begin to unravel next month...

Are the American stock markets up,or is the US dollar down???  That is the Question...On 9/25/07,the USDX hit an intraday 52 week low of 78.213...( see last post)

Insolvency in housing,bonds,banks,and derivatives trumps a liquidity crisis...Insolvency can't be cured by the Fed inflating the dollar by lowering the lending rate in FED attempts to avert a recession which maybe unavoidable...The steepening yield curve of the 30 year bond foretells inflation...

STAGFLATION would mean a double failure by the Fed...Hyper-stagflation would call into question the continued existence of a "Federal" Reserve Board, run by the banking industry,in deciding our nation's monetary policy...   

The USDX touched an all time low today of 78.159....

USDX is 77.869 and collapsing...   

Today Net Bank, tomorrow the ....?        

Now that it is tomorrow,Citibank is  next...It will receive a Fed engineered, private sector bailout of hundreds of billions worth of structured investment vehicles (SIV) by the banking industry...Accounting rules are allowing Wall Street to hide hundreds of billions in debt loses by pushing them off their balance sheets...Indeed,they can't figure out what these assets in packaged debt are even worth...   

In a meeting Monday night,Bernanke said the Fed "was prepared to REVERSE the policy easing if inflation pressures proved stronger than expected."   Gee,I wonder if he had  expected $85 oil,the highest gold price in 28 years,and the lowest USDX in history???

When asked if he thought the value of the dollar imparts inflation,Bernanke dodged the question by saying a fixed exchange rate would not be good for the economy...  Gee,I wonder if he knows that native americans call that speaking with forked tongue...   

Forked tongue indeed- not counting energy and food in the core inflation numbers definitely qualifies!

Should be an interesting day.