INTEREST-RATE MOVES WARN THE ECONOMY MAY BE BROKEN

NY POST ^ | 08.05.03 | JOHN CRUDELE

[Beck_isright]

That's different from saying that the economy is - or isn't - improving. It is like saying it can't improve. And the idea that the nation's business cycle is "broken" is a lot more troubling than what you are hearing economists and politicians arguing about these days.

[Beck_isright]

For everyone's commentary and entertainment value. My opinions are well known. The disconnect between economic reality and confidence in our economy has been established. If you don't believe me, go ask Templeton or Buffet yourself.

[Beck_isright]

Pinging the usual suspects...

[shrinkermd]

I enjoy gloomcasting, but a steep yield curve is characteristic of a growing economy.

[Cold Heat]

How about this reason:

The bond marketeers are worried that their customers are bolting for the door and are manipulating the yeilds!

Duh! I see a congressional investigation of the bond houses in my tea leaves.

[CyberAnt]

Hmmmm? didn't Bush just have an economic summit at the White House recently - 2 or 3 weeks ago - and they (the economists who attended) came away from that meeting saying the economy was poised for recovery. That doesn't sound broken to me.

[Beck_isright]

"I enjoy gloomcasting, but a steep yield curve is characteristic of a growing economy."

Or a lack of confidence in the central bank of said economy.

[Cold Heat]

Did you see inflation go down from an annual rate of 2.4 percent to just 1 percent, like Washington did?

Yes, the number excluded energy which was the only thing going up at the time.

[boris]

I am no financial expert (one look at my 401K will tell you that). But I've had this feeling for a while. A kind of "malaise" (sorry). Hard to put into words.

It reminds me of Chernobyl. There, the operators--lulled by lots of 'experience'--thought they understood the system. In reality it was a highly nonlinear one. They kept withdrawing control rods and seeing little or no response. All of a sudden, they withdrew one too many.

The Fed, as I keep saying, has little "control authority" left. Once interest rates hit zero you cannot lower them any longer. They've been twisting the knob lower and lower to try to keep the economy afloat and SURPRISE! that trick does not seem to work any more.

So I hear they're buying back bonds. I dunno. That's why I'm an engineer--it lets me deal with systems I understand, and I'm not egotistical enough to think I understand the economy.

--Boris

[Beck_isright]

"Hmmmm? didn't Bush just have an economic summit at the White House recently - 2 or 3 weeks ago - and they (the economists who attended) came away from that meeting saying the economy was poised for recovery. That doesn't sound broken to me."

If you believe an "economist" then you believe everything out of the mouth of Ted Kennedy. One has a degree and will not admit he's a liar. The other is a liar with a degree who will not admit to being an alcoholic and murderer.

[Monti Cello]

Do interest rates have anywhere to go but up?

Elsewhere I've been reading about the grave dangers of dirt-cheap car and home loans....

[joesnuffy]

Statistics never lie

[the gillman@blacklagoon.com]

But those who interpret them often do.

[Beck_isright]

"It reminds me of Chernobyl. There, the operators--lulled by lots of 'experience'--thought they understood the system. In reality it was a highly nonlinear one. They kept withdrawing control rods and seeing little or no response. All of a sudden, they withdrew one too many."

Well put. Kudos to your analysis. No one on this board, including myself can predict what is going to happen in the next 5 years. All we know is that we are playing with the big one, the longer and higher we allow the debt to pile up.

[RLK]

the economy was poised for recovery...

-----------------

Poised? What does that mean, if anything?

[norraad]

Maybe it's lack of manners, I heard it takes him 12 hours to open a car door for a lady.

[Beck_isright]

" Elsewhere I've been reading about the grave dangers of dirt-cheap car and home loans...."

4 year car loans topped 6.5% on average last week. And that's if you have AAA credit and put a down payment down. The reality in the market place is much different.

[Beck_isright]

" Poised? What does that mean, if anything?"

It means if you purchase just the right options, you can make a ton of money next year. Howver if you are a factory worker, it means you can look forward to closing the plant down and exporting it to China because there is an increase in demand for $4.95 Xmas tree lights.

[judywillow]

First, let me say that I hope I'm wrong about this. But the way in which interest rates have behaved over the past month or so should be causing serious concern that the country has gotten itself into a fix that can't be remedied in any conventional way.

The whole thing is about jobs, pure and simple.

There need to be limits on "globalization". Somebody needs to start doing a good job of determining which industries the United States needs to keep and protect, and which would be counterproductive to try to keep. The best example I can think of would be steel and carbonfibre. If it's true that saving one job in the steel industry costs the US $800,000, then we're obviously better off not trying to do it; there's a 10-1 savings just handing former steel workers $80,000 a year. Exporting a sunrise industry like carbonfibre on the other hand guarantees that the only things we'll ever see made of it are golf clubs and tennis racquets whereas, if we protected such an industry, we could see an entire new unbelievable age of building in America in which skyscrapers could be put together in weeks rather than years, the layers being lifted one on top of the other and simply snapped together. Aluminum was more costly than gold when first developed; it would have stayed that way if we'd given the aluminum industry to the Chinese.

Somebody, preferably a republican, needs to step up and become the Andrew Carnegie of carbonfibre.

The jobs of entire groups of people who vote for republicans should certainly not be exported, and this certainly includes the computer and tech sectors. Adam Smith as I see it was basically a charlatan. This country was basically built around ideas which were polar opposites of the notion of any "invisible hand", most particularly the ideas of Friedrich List and the idea of the "American system of economics", and the American worker cannot compete on a dollar basis with people who live in thatch huts . This is crucial. The economy has to improve within the next year for Republicans to feel secure of winning, and jobs are the most major key. When a company like IBM sets out to export an entire category of technical jobs to India, they are basically trying to destroy the Republican party. They should be treated accordingly by a Republican administration.

[CyberAnt]

Everything is in place for the recovery to take place. Stock market is up - housing starts are up - mfg. is up (higher than predicted). The only thing in an up swing is employment.

However, a lot of students go home in the summer and quit their jobs. Before next month, they will return to school and their jobs - employment numbers will come down.

[Dead Dog]

Just got a 2.9% 60 month, with less then 10% down.