Wednesday, October 29, 2008

ZIRP is Not Just a State of Mind

I am real short on time this evening, so just a few quick words.

Only 1% Left Until ZIRP is Reached
Boom Boom Bernanke and pals delivered the goods and cut rate by 50bps to 1%. This matches the cryptic 1% that ignited the credit bubble that is now the credit bust. Will doing what caused the problem fix the problem? Only time will tell but I think that is a stacked deck against!

With only 1% left to before we are in the Japanesque Zero Interest Rate Policy stage, what other tricks can the FED/Treasury pull out? Already there is some baloney plan of guaranteeing 3 million mortgages providing the "owners" can pay any amount at all on a mortgage. Great stuff.

New Addition to Blogroll
There are simply so many blogs out there nobody has the time to pour over all the material out there. In the blogroll to the left I try to list the sites that I check every single day on multiple occasions to get the best and most thorough analysis. All the sites listed offer the very best in thought and value for your time spent. Tonight I am adding another.

I have been stopping by the site called "Jesse's Café Américain" quite a bit, and now it has become a daily read. No nonsense, by the numbers insight along with macro forecasting that I feel has been very good. Website is at:
http://jessescrossroadscafe.blogspot.com/

Or use the blogroll. One recent post hit upon something related to my recent rants about the Treasury issuing massive amounts of debt as if there is no upper limit. Jesse takes this on in the following post:
http://jessescrossroadscafe.blogspot.com/2008/10/in-2009-us-may-be-forced-to-selectively.html

Key Excerpt:
"We have seen estimates that next year the US will have to finance a $2 Trillion annual deficit. They may be able to push it further into the next Administration than that by the forbearance of the world, but not by much. We'd expect a significant drop in Treasuries by 2011 at the latest.

It should be obvious to anyone that we are approaching the apogee of the Treasury bubble, with the credit bubble having broken already.

When the Treasury says they are facing unprecedented challenges in financing the US public debt next year that is an understatement.

Once the deleveraging of the markets subsides, the dollar and Treasuries will drop, perhaps with some momentum, as the rest of the world realizes that the US has no choice but to default. This can be resolved in several ways, including continued subsidies from foreign sources in the form of virtual debt forgiveness, devaluation of the dollar, raising of taxes, and higher interest rates on debt.

The problem now is that the US has breached the point where it can service its debt out of real cash flows, and turning this around will require a severe devaluation of the US dollar.

Devaluation and selective default are the only foreseeable systemic alternatives. There are other exogenous paths of a more political nature such as consolidation and war that may color the default a slightly different color, but a selective default it remains.

This is the fundamental situation. Everything else is speculation and commentary."


Great Stuff!

Have a good night.

2 comments:

watchtower said...

I don't know what to say about the current financial situation except we're FUBAR'ed (there is another one of those acronyms) so I thought I might make mention of the new Camaro.
I don't know if anyone here caught the latest "Motor Trend" (or was it "Car & Driver?) and their report of the new V6 Camaro, but this thing looks like it is going to be awesome.
They are almost getting sub 6 second (0-60) times out of the V6!
I can't wait to see what the V8's will do, not to mention it will have IRS which will relegate the current Mustang to the dustbin in the handling department.
If my memory serves me right the magazine said that it has a feeling not unlike the Infinity G37, I would say that is saying a lot.
I can't wait till our local dealer gets one in (if he doesn't go BK first, which is a distinct possibility) to take a look at it.

Anonymous said...

Wait until the elections are over.
All bets are off until the guard is changed.

G