Tuesday, September 16, 2008

The Fed, AIG, etc...

Well, the Fed refused to lower interest rates.  

I know a lot of folks in the investment community are PO'd right now, but I am not sure what a cut would have done.  At a 2% Fed Funds rate, the U.S. has negative real interest rates. If negative interest is not stimulative at 2%, what more will 1.75% do?  

Also, the Fed has a real problem in that it cannot cut rates below 0 - much as they might like to.  We all know what happened to Japan when they lowered rates to near 0 - NOTHING.  Maybe pretending to matter is more important for the Fed to do than to show that they don't matter.


The nationalization of the American economy is in full swing.  Pretty ironic that the U.S. would go Socialist under a fundamentalist christian, Republican president!  I wonder what a liberal Democrat would have done...

The bailout of AIG is just one more in a long line of Nationalizations to come, though we might not call them that.  Ford, G.M. Citigroup, etc... ALL will get nationalized eventually.  The American people are addicted to government bailouts in addition to Oil and social programs.  I don't hold a great deal of hope out for the political environment when the Energy S.H.T.F.

Got Gold? Get yours while the getting is good.  This goes for Silver, too.

At this pace at some point the US$ will join the reich mark in the dust bin of history.

Back soon,

Mentatt (at) yahoo (d0t) com


Anonymous said...

I wonder what form of gold & silver would best survive the coming typhoon?

Thanks for all your ongoing commentary on all this.

Donal Lang said...

I think I've lost the plot on oil prices; 4 storms chew up the Gulf, Russia gets stroppy in Georgia next to an oil pipeline, Nigerian rebels declare war on the oilrigs in the Delta, oil stocks are lowest for years and winter's coming, and yet the oil prices continue to fall.

What have I missed??

Greg T. Jeffers said...


Nothing. But the fear is that the economy is slowing DRAMATICALLY.

Now is the time to go long winter delivery months, but you MUST take losses quickly. Remember commodity trading is SPECULATING, not investing

Bureaucrat said...

We are in a deflation, the biggest since the great depression. Demand for everything is dropping like a rock (houses, cars, etc.) And you don't need oil to move empty trucks or make toy cars. It is kinda funny that driving has dropped 4%, yet crude dropped almost 40%. I guess there were a lot more energy speculators than anyone was willing to admit to. Meanwhile, RBOB gasoline (delivered to gas stations) is still low while all my favorite gas stations that I watch are 10-15 cents up (from Ike) at the pump. Doesn't make much sense.

Andrew said...

Well, going by Greg's definition everyone who trades in commodities is a speculator - except the commercials who actually take delivery of the product & the producers who sell it.

There's still a lot of speculators active, except now they're driving the price down rather than up. There's also the insolvent banks & hedge funds pulling out as they desperately need the cash...

So what happens in the oil markets when credit has dried up, the liquidity provided by speculators is gone and no-one has any money? Even though the supply of oil is diminishing, how can the price go up when there's such massive deflation?