With the re-appointment of Greenspan, Dubya now has his "A" Team in
place, Greenspan will run the economy, and Rummy and Wolfie will run
the War in Iraq.
And, very likely the voters will run them all out of Washington in
November!
Interestingly, there is now some noise that Mr G may NOT have to
raise rates, now that oil is acting as a "tax" on the economy,
slowing it.
AMAZING! Didn't I predict that Greenspan would NEVER raise rates?
CONSIDER: WITH THE EXCEPTION OF ALL THE EASY MONEY SPECULATION
FOSTERED BY THE FED; THE US ECONOMY IS REALLY RATHER SLACK.
Wages are punk. Job growth is "iffy." Capacity Utilization is
flabby. Capex is in the eye of the beholder. And, China is
exporting deflation with every boat that leaves it's happy shores.
SO, WHY RAISE RATES? IS OUR BELOVED ASSET SPECULATION SUDDENLY A
PERSONA NON GRATA IN THE US ECONOMY?
HOWEVER THERE IS THE OIL PROBLEM; WHICH IS ODDLY TIED TO THE DOLLAR;
AND NOT REALLY SUPPLY AND DEMAND.
A WEAK DOLLAR MEANS HIGH OIL PRICES, AND ACTUALLY HIGH COMMODITY
PRICES IN GENERAL.
ALAS, EASY MONEY FOR STOCK SPECULATION CAN NOT BE HERMETICALLY SEALED
OFF FROM EASY MONEY FOR COMMODITY SPECULATION.
AND THAT, GENTLE READER, IS REALLY GREENSPAN'S PROBLEM NOW.
NOT THE TEAMING MIDDLE CLASS MASSES IN CHINA! NOT YET ANYWAY.....
Note well, that any attempt to ACTUALLY raise rates will crash bonds,
derivitives, real estate and the various and sundry "carry trades,"
known and unknown, that are still out there.
SO, WATCH FOR INCREASING TALK ABOUT HOW A RATE HIKE IS NOT NECESSARY,
AT LEAST NOT TO SLOW THE US ECONOMY.
NOW, HOW FOREIGNERS REACT IS ANOTHER MATTER!
ONCE THE NEWS IS OUT THAT RATES ARE NOT GOING UP. FOREIGNERS MIGHT
SELL THE DOLLAR, AND/OR CRASH THE US BOND MARKET.
SAY, HELLO TO MR. EURO 130! REMEMBER HIM?
THEN AND ONLY THEN, WILL GREENSPAN BE TRULY FORCED TO RAISE RATES!
I HAVE ALWAYS SAID THAT GREENSPAN WILL ONLY RAISE RATES TO DEFEND THE DOLLAR, AND NOTHING ELSE!
MR G LOVES THE PUNCH BOWL, AND HE IS TOO OLD TO GIVE UP BAD HABITS NOW...........
AS LONG AS FOREIGNERS KEEP SENDING US THEIR MONEY, RATES WILL NOT GO
UP. AND RIGHT NOW, ANYWAY, THE FOREIGN MOOLA IS STILL ROLLING IN.
POSTSCRIPT: And, the fact that two or three rate hikes are "already"
priced into bonds, during an election year is a little nutty.
Because if these hikes ACTUALLY do occur, the chattering classes will
have a field day. That's is another reason why I suspect the rate
hikes will remain, for now: JUST TALK!
