Feds most likely will drop rates 1/2%-1%

[sammyg2]

Originally Posted by pwd72s

Agreed. Think it might be time to short the dollar?

Betting against the dollar depends on what you are comparing it to. Other foreign currencies? Most of them are in the dumper too.
Gold or some other commodity? prolly a safer bet.

[competentone]

Originally Posted by jyl

As for inflation, there is almost none to be had. Demand is plunging so hard that deflation is the worry. Think need to see demand improve - i.e. economy recovering - before see inflation as concern. At that point, hopefully Fed can pull back some of the money it has pumped into bankings system etc.

You are still mistakenly stuck on this "demand" component as a factor in inflation. Ultimately, money supply is the primary factor affecting prices.

Demand for "anything" can drop, but prices will not drop if the businesses making those "anythings" cannot make a profit selling at a lower price. If demand drops, you will see a contraction in the number of businesses producing the "anythings," but not prices dropping.

Add to an overall business contraction (due to decreasing demand) an inflating money supply (due to government action) and you have a recipe for massive price inflation in such an economy.

Additionally, the Fed has never "pulled money" out of the economy. All it has done in the past (and all it really can do) is slow the rate it creates new money at. If the Fed stops making new money, the economy's increases in productivity (if it has such) can counteract the effects of the Fed's inflationary actions.

One cannot "print" wealth, but idiots like Bernanke believe they can -- and we all end up paying for their stupidity by seeing the value of our savings diminish.

[Hugh R]

Originally Posted by cantdrv55

I'm doing a refi right now. Fixed at 4.875% at 1 point for 30 years. With the savings I'll be seeing, I can almost make double payments and reduce the time to less than 15 years.

If you can, refi with the number of years you have, or try and go for a 15 or less. First year of a mortgage is mostly interest, last year is mostly principal.

[Zeke]

Originally Posted by competentone

One cannot "print" wealth, but idiots like Bernanke believe they can -- and we all end up paying for their stupidity by seeing the value of our savings diminish.

And our debt lessened if it can be frozen. Which it can't because of said stupidity.

The nice thing about being self employed is the ability to raise rates as necessary in a timely fashion. Sure, it's a game of lowest common denominator, but nevertheless, rates do go up when expenses go up.
No turbo lag.

[304065]

Originally Posted by competentone

You are still mistakenly stuck on this "demand" component as a factor in inflation. Ultimately, money supply is the primary factor affecting prices.

Demand for "anything" can drop, but prices will not drop if the businesses making those "anythings" cannot make a profit selling at a lower price. If demand drops, you will see a contraction in the number of businesses producing the "anythings," but not prices dropping.

Add to an overall business contraction (due to decreasing demand) an inflating money supply (due to government action) and you have a recipe for massive price inflation in such an economy.

Additionally, the Fed has never "pulled money" out of the economy. All it has done in the past (and all it really can do) is slow the rate it creates new money at. If the Fed stops making new money, the economy's increases in productivity (if it has such) can counteract the effects of the Fed's inflationary actions.

One cannot "print" wealth, but idiots like Bernanke believe they can -- and we all end up paying for their stupidity by seeing the value of our savings diminish.

I have been trying to stay out of these discussions but I would like to point out that there is absolutely no current economic evidence of an inflationary tendency.

Commodities are falling. Check the price of crude and the forward curves for metals. Unemployment has risen and is likely to continue to increase. Whether you believe the Phillips Curve or not, people losing their jobs tend not to drive up the price of goods and services, and the ones that retain their jobs have diminished confidence, resulting in cash hoarding.

Suggesting that the Fed's current loosening will result in inflation is one of those propositions that will always be true-- of COURSE we will return to inflation once we get through the cycle. But meanwhile, the Fed is attempting to stave off DEFLATION amid an environment of negative growth. So unless you can predict within a quarter or two exactly when inflation will kick in, it's rather like predicting the sunrise.

Look, I'm not trying to single you out, but the suggestion that somehow the Fed is misguided by stepping on the accelerator of money supply growth at this point in the cycle isn't borne out by the evidence. After the '29 crash the money supply contracted for FOUR years. Bernanke(-San) smartly went to 0% and now FOMC is going to push into negative territory to widen spreads and allow capital to pool up again.

Might as well get over the whole fiat vs. commodity money thing along the same lines. The idea that the tools of monetary policy should be tied to the rate of gold production as an ultimate check on inflation is a quaint one, but completely opposite what the economy needs at the moment. No way all the gold mining activity in the world could react fast enough.

OK, back to the sidelines for me.

[turbo6bar]

Originally Posted by pwd72s

Agreed. Think it might be time to short the dollar?

ruh roh raggy

[jyl]

Indeed, CPI is falling at annualized -12%/yr (-3% in last qtr). Inflation is hardly the problem right now.

Originally Posted by john_cramer

I have been trying to stay out of these discussions but I would like to point out that there is absolutely no current economic evidence of an inflationary tendency.

Commodities are falling. Check the price of crude and the forward curves for metals. Unemployment has risen and is likely to continue to increase. Whether you believe the Phillips Curve or not, people losing their jobs tend not to drive up the price of goods and services, and the ones that retain their jobs have diminished confidence, resulting in cash hoarding.

Suggesting that the Fed's current loosening will result in inflation is one of those propositions that will always be true-- of COURSE we will return to inflation once we get through the cycle. But meanwhile, the Fed is attempting to stave off DEFLATION amid an environment of negative growth. So unless you can predict within a quarter or two exactly when inflation will kick in, it's rather like predicting the sunrise.

Look, I'm not trying to single you out, but the suggestion that somehow the Fed is misguided by stepping on the accelerator of money supply growth at this point in the cycle isn't borne out by the evidence. After the '29 crash the money supply contracted for FOUR years. Bernanke(-San) smartly went to 0% and now FOMC is going to push into negative territory to widen spreads and allow capital to pool up again.

Might as well get over the whole fiat vs. commodity money thing along the same lines. The idea that the tools of monetary policy should be tied to the rate of gold production as an ultimate check on inflation is a quaint one, but completely opposite what the economy needs at the moment. No way all the gold mining activity in the world could react fast enough.

OK, back to the sidelines for me.

[cantdrv55]

New refi rate is now 4.6% with 1 point.

[1967 R50/2]

Originally Posted by jyl

Indeed, CPI is falling at annualized -12%/yr (-3% in last qtr). Inflation is hardly the problem right now.

Bookmark this and check back in 18 months.

[304065]

Originally Posted by 1967 R50/2

Bookmark this and check back in 18 months.

It sounds like you are going on the record, good. Which direction?

[Vintage Racer]

Originally Posted by john_cramer

Suggesting that the Fed's current loosening will result in inflation is one of those propositions that will always be true-- of COURSE we will return to inflation once we get through the cycle. But meanwhile, the Fed is attempting to stave off DEFLATION amid an environment of negative growth. So unless you can predict within a quarter or two exactly when inflation will kick in, it's rather like predicting the sunrise.

First, I learned a long time ago that predicting the direction of any markets in any short time horizon is a futile exercise.

Second, anyone that doesn't know about the current deflation scenario has been living under a rock.

Third, I retired early in my career because I anticipated forthcoming events. If I wait until the economy improves to buy stocks, I will be too late as the market will rally at least six months prior to the improving economy. I can't buy inflation protection after inflation raises its ugly head because it will be already priced into the market.

We will have inflation, and it will be ugly.

[competentone]

Originally Posted by john_cramer

I have been trying to stay out of these discussions but I would like to point out that there is absolutely no current economic evidence of an inflationary tendency.

Commodities are falling. Check the price of crude and the forward curves for metals. Unemployment has risen and is likely to continue to increase. Whether you believe the Phillips Curve or not, people losing their jobs tend not to drive up the price of goods and services, and the ones that retain their jobs have diminished confidence, resulting in cash hoarding.

Suggesting that the Fed's current loosening will result in inflation is one of those propositions that will always be true-- of COURSE we will return to inflation once we get through the cycle. But meanwhile, the Fed is attempting to stave off DEFLATION amid an environment of negative growth. So unless you can predict within a quarter or two exactly when inflation will kick in, it's rather like predicting the sunrise.

Look, I'm not trying to single you out, but the suggestion that somehow the Fed is misguided by stepping on the accelerator of money supply growth at this point in the cycle isn't borne out by the evidence. After the '29 crash the money supply contracted for FOUR years. Bernanke(-San) smartly went to 0% and now FOMC is going to push into negative territory to widen spreads and allow capital to pool up again.

Might as well get over the whole fiat vs. commodity money thing along the same lines. The idea that the tools of monetary policy should be tied to the rate of gold production as an ultimate check on inflation is a quaint one, but completely opposite what the economy needs at the moment. No way all the gold mining activity in the world could react fast enough.

OK, back to the sidelines for me.

It sounds like you really don't understand what I'm saying -- particularly my comment, "One cannot 'print' wealth, but idiots like Bernanke believe they can."

Some basic economics:

Wealth is created through productive effort -- that is, people engage in productive activity (by themselves or through contractual agreements as a "business") and produce goods and services (wealth).

Money is a tool used in trading wealth.

"Printing" more money does not create more wealth.

Printing more money can create a distortion in the economy -- essentially "tricking" the productive people -- making it appear temporarily that there is more wealth around, but increasing the amount of money does nothing to actually increase overall wealth.

The government/Fed creating more money, is like a group of counterfeiters entering a town and spending a bunch of counterfeit money. Everyone feels like things are "booming," but the "bust" comes when everyone realizes their new wealth was really a theft.

We've been having a "boom" in our economy from the government/Fed's money creation policies (going on for literally decades).

The bust is happening now, but instead of letting the distortions the government's "counterfeiting" has created work themselves out of the economy (which would involve deflation in certain asset classes and inflation in others), the government wants to print even more money.

Imagine a town that has been the victim of counterfeiters suggesting that the best solution to deal with the "bust" after the theft has been realized, was to invite a new group of counterfeiters into the town to do the same scam all over again!

That would be madness, but it is the exact policy Bernanke is following with our economy.

No one can "borrow and spend" themselves into prosperity.

The government cannot reverse any economic slow-down (no matter what the cause) by printing money.