Hate that "weak" economy. 4% YOY is "weak?"
Posted on 09/18/2007 1:03:46 PM PDT by Uncle Miltie
The dollar fell to a record low versus the euro on Tuesday after the Federal Reserve cut its key interest rate by an aggressive half a percentage point to prevent the U.S. economy from weakening further on turmoil in the credit and housing markets.
Policy-makers reduced the benchmark lending rate between banks by the most since November 2002 to 4.75 percent, the lowest level since May last year. It was the first rate cut in four years. The Fed also lowered the discount rate it charges for direct loans to banks by a half-point.
Traders sold the dollar as lower rates make U.S. dollar-denominated assets less attractive. Financial markets had widely expected the Fed to lower overnight borrowing costs by at least 25 basis points, but were split over whether the move would be a more aggressive half-point.
"A 50 basis point cut in the funds rate and the discount rate is a brave opening gambit in the easing cycle from a Fed chairman that for credibility reasons was expected to err on the side of caution," said Alan Ruskin, chief international strategist at RBS Greenwich Capital, in Greenwich, Conn.
He said the move will also cause some to question the Fed's inflation-fighting credentials.
Against the dollar, the euro was 0.7 percent higher to trade at $1.3962, after earlier trading at a record high of $1.3977. The dollar pared some of its early gains against the yen to trade at 115.70 yen.
"Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time," the Fed said in a statement outlining its decision.
Omer Esiner, a market analyst at Ruesch International in Washington, said, "The accompanying statement sounds a somewhat cautious tone, pointing out the Fed is a bit more worried about the fallout from the recent financial market turmoil."
The dollar fell nearly 1 percent against the Canadian dollar to trade at 1.0164, a 30-year low. Some analysts said recent oil price highs above $80 and lower U.S. interest rates may soon push the greenback to parity with its Canadian counterpart, a level last seen in 1976.
The high-yielding New Zealand dollar also rose 2 percent to $0.7205, while the Australian dollar was up 1.8 percent at $0.8490.
Inflation here we come.
Way to stick it to the Chinese!
Ditto for Chairman Bernanke!
When are online banks like Emigrant Direct and ING Direct going to lower their savings and CD rates? I just checked and their rates are the same as before.
Uncle Ben you magnificent bastard!
I bet all the CFR Globalists are all happy now
yes instead let’s have a higher rate and a weak economy.
Whoops. Wrong Uncle Ben.
I bet all the Blame America First Goldbuggering Nutbags are sad now.
Hate that "weak" economy. 4% YOY is "weak?"
And to retirees, the middle class, and all those Americans still saving
So? At least now we stand a chance at earning some dollars. Anything’s better than zero.
Buy gold!
That's harsh.
I'm interested in earning assets, not inflation hedges. As an investor, I prefer hard money, low inflation and economic growth based on those presumtions.
Loose money and it's attendant inflationary expectations can destroy virtually any of my U.S. dollar denominated cash flows.
Buy the MSEAFE index.
I know. Ka-ching!!! ka-ching!!!! is so anti-American-- delete sarcasm
Actually I think a small rise would be good.
You just can’t explain why.
Sustainable economic growth not based on artificial stimulus, deceit or manipulated forces? Kind like oil / gasoline futures and those $350K sub-prime mortgage loans handed out to $40K income earners so the developers, builders, and real estate agents, as well as the loan agents, and DIY flippers, can all rake in some cash, right?
I did repeatedly. And Like I said it will and is now leading to a lose of value on the dollar.
Bzactly. Ben’s just protecting them some more.
When will the wound be excised, instead of patched over with dirty dressings?
I’m sure one of their supporters here at FR will be along any moment to agree.
You repeated the assertion, you didn't explain why it will lead to inflation.
And Like I said it will and is now leading to a lose of value on the dollar.
How, exactly?
The US dollar has dropped 63% against the Euro in just 5 1/12 years. Oil just went from $20 to over $81 barrel in the same time span. We saw a 500% price increase in price - the Eurozone saw less than half that. We are getting poorer - they, China, Britain, etc. are getting richer.
When the patient is so near death as not to matter I am afraid.
That's about a 300% increase in price.
Am I the only once that’s noticed that the oil price seems to be adrift of the dollar? In fact (I don’t have the charts available), it strikes me that it is tracking the Euro now... what does that foretell?
THe rate was just cut, and the dollar plumets. As for inflation being spurred by cheap money it is econ 101. supply adn demand. The cheaper soemthing is to get, the more people whant it, the hight the price goes.
Not true. Virtually any measure of GDP growth will show that we are getting richer than the Europeans over any reasonably long period of time.
And, on an absolute static basis: "If the European Union were a state in the USA it would belong to the poorest group of states. France, Italy, Great Britain and Germany have lower GDP per capita than all but four of the states in the United States. In fact, GDP per capita is lower in the vast majority of the EU-countries (EU 15) than in most of the individual American states. This puts Europeans at a level of prosperity on par with states such as Arkansas, Mississippi and West Virginia. Only the miniscule country of Luxembourg has higher per capita GDP than the average state in the USA. The results of the new study represent a grave critique of European economic policy."
a half a point?! Now that's amazing. That's as big a white flag as anyone could wave.
I hope he proves to have the wisdom of Solomon in time, but for now, he looks pretty weak. Record high oil prices and stock valuations aren't exactly fodder for a rate cut.
If he's looking to find the bottom on the dollar, this is one way to do it. Likewise, to break the RMB peg.
If this indicates that the liquidity issue is more frightening to him than inflation -- I would be very concerned.
Does a stronger economy need more or less money? I know that 4.75% is lower than 5.25%, but why do you believe 4.75% is "cheap" money?
Because I remeber all to well 18%+ interest rates. Like I said before this will lead to a weaker dollar and more inflation.
Bernanke won't be the next Greenspan. He will be the new Arthur Berns.
Me too.
Like I said before this will lead to a weaker dollar and more inflation.
How will it lead to inflation? What if the economy tipped into recession? Could that lead to inflation?
You don't have to be a goldbug to resent the debasement of our currency, especially right before one is taking a trip to Spain! ;-)
OK. China is getting richer faster by any measure. But not Old Europe.
I’m sure you realize it was just a parody of #8.
“China is getting richer faster by any measure.”
Depends on how you’re counting. At exchange rates we’ve added about 3.7 trillion in GDP since 2000, which is significantly more than China’s entire GDP. But, of course, the Chinese are getting richer faster than we are. That’s one of the “benefits” of moving from a nation of poverty to one of less poverty.
Regarding China’s enrichment...... China is experiencing economic growth on an unimaginable scale. China is in transition from a communist nation to some as yet undefined new economic model.
Free of the tight bounds, the entrapranuerial population is trending capitaiistic. The result is growth.
Europe, strangled by socialism is growing poorer and regressing. The day will come when the Gulf States, India, China and the Rim states will bury Europe.
European companies will and are escaping to North America.
Regarding China’s enrichment...... China is experiencing economic growth on an unimaginable scale. China is in transition from a communist nation to some as yet undefined new economic model.
Free of the tight bounds, the entrapranuerial population is trending capitaiistic. The result is growth.
Europe, strangled by socialism is growing poorer and regressing. The day will come when the Gulf States, India, China and the Rim states will bury Europe.
European companies will and are escaping to North America.
So? If you really believe that then short the dollar and go long on the euro.
Buy euro leaps. It all works both ways.
>As for inflation being spurred by cheap money it is econ 101. supply adn demand
No. - That is not the defination of inflation.
Inflation is an increase in the money supply and that is not determined by interest rates at all.
He keeps making the interest rate claim, but won't back it up. I've been trying for maybe a week to get him to show how it works. LOL!
That's what it all boils down to. There are doers, and there are complainers. Opening an account for currency trades is easy, I just opened one with Tradeking totally on line, but even without an account anyone can use their Live Chat and find out all the particulars --and there's plenty other brokers too.
Doers make money; all complainers get is a pretend moral superiority.
What’s the MSEAFE? I got the “europe, asia, far-east” part of it. Microsoft isn’t its’ own sovereign nation is it??
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