Interest Rate Roundup

Friday, June 06, 2008

Crude up $11+ freaking dollars ...

That just beats it all. Biggest two-day rally in the history of the futures market. Heating oil limit up -- limit up -- in June ... ahead of a weekend where New York City's high temperature is supposed to be 93 degrees. If I weren't staring at this stuff on my quote screen, I wouldn't believe it.

I hope Ben Bernanke is happy about what his Federal Reserve's policies have led to. I really do. The response to the tech bust was to slash rates deep into negative territory. That created a housing bubble. The response to the popping of the housing bubble was to slash rates deep into negative territory again. Now, we have a tanking dollar and an oil/commodities bubble. Yet somehow, the Fed is shocked ... SHOCKED ... that it's happening. I'd be laughing if I didn't have to spend $41 every time I fill up my gas-sipping Toyota Corolla.

4 Comments:

  • Yup, Bad thing eventualy happen when one strats down the road of currency devaluation. Can't wait for the printting presses to fire up to pay the Boomers SS and Medicare. This country is screwed. Ben had a lot of help from the DC also.

    By Anonymous Anonymous, at June 6, 2008 at 11:50 PM  

  • Nuts.

    There was a guest on CNBC who thought Helicopter Ben is doing a fantastic job and how rude Jean-Claude Trichet is for hinting at raising rates.

    Rick Santelli, the only honest person on that channel, asked that guy which planet is bed was on.

    I think Trichet knows very well that the Eurozone will be in deep recession. However, he will get inflation under control and then lower the rates once economy is in recession.

    In short, he will probably make everyone swallow the bitter pill of recession and not go after some abstract notion of avoiding the recession. At least, he would have protected the purchasing power of Euro.

    Fed on the other hand will destroy the purchasing power of US$ and leave everyone hanging in a crushing recession.

    Speechless.

    By Blogger shankar, at June 7, 2008 at 12:33 AM  

  • I grant you that Bernanke's policies are probably responsible for the current commodity bubble, but under the circumstances what could he done otherwise? When Bear Stearns collapsed had the Fed just said, "to hell with it, let the market work it out themselves" wouldn't this have led to an almighty crash? Wouldn't the whole international banking system have completely collapsed? Moreover, while the effects of Bernanke's stimulative policy may be the cause of the speculative frenzy in the commodity markets today it is my perception that the Fed's rescue of Bear Stearns and the injection of liquidity into the banking system prevented a catastrophic collapse that would have left the international banking system in ruins. While it is probably true that the risk of inflation has substantially increased the Fed's policy has actually allowed the markets to decline in a more orderly fashion.

    Also it is my perception that the problems that are coming to a head today, have been years (even decades in the making).

    By Blogger Richard, at June 7, 2008 at 2:02 PM  

  • Richard:

    Your argument is predicated on the assumption that the crash has been permanently avoided.

    Let's reserve the judgment on that till April 2009, and see how many such collapses does the Fed have the ability to prevent.

    The right choice would have been to let BSC go bankrupt and in turn send the signal to other players that they should stop dragging, take writedowns, wipe existing shareholders and raise capital fast.

    But in this bizzaro world, Fed will achieve that while exactly trying to prevent that.

    By Blogger shankar, at June 9, 2008 at 8:24 PM  

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