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Tuesday, January 22, 2008

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The Fed ain't f&%$ing around.... and neither are the markets

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

The question is whether this move will forestall further panic in global and domestic markets or merely exacerbate them.

UPDATE: Uh-oh.

posted by Dan on 01.22.08 at 08:55 AM

Comments:

The economy is one of the reasons I'm somewhat amazed for the stampede of candidates for the WH this year. Whoever wins will have to clean up the mess that Dubya & Pals will leave behind, and my symbolic USD is placed on the side that passing the buck won't cut it over the next 8 yrs like it has over the past 5-6 years.

As a president, you will be dealing with a booming elderly population with its health care expenses. USD is much weaker. Food & Energy inflation is moving so quickly that I know people who have finally seen the price of bread move which has been happening since we start diverting products from our food shed into our gas tanks. Corporate earnings are going to be much weaker over the next few quarters, and our real estate bubble will still trend poorly into mid '09 or later.

Moving back on topic, will a 75bp cut calm the market? Nope. Will stagflation raise its ugly head? Probably. Do I think about the various ways to stew a boot as I hobo across America looking for work? Surprisingly, yet.

posted by: yagij on 01.22.08 at 08:55 AM [permalink]

The real question is how long it will take Al-Q to post a video claiming that they caused this economic downturn. Let's face it, it fits perfectly with their narrative and the immense simplification ought to play well among their potential recruiting pool. Remember "we defeated the USSR?"

posted by: Troll on 01.22.08 at 08:55 AM [permalink]

The economy is one of the reasons I'm somewhat amazed for the stampede of candidates for the WH this year.

Actually, it's a great reason. First, the winner will have 4 years for the economy to recover; second, after W almost anyone will seem intelligent and statesmanlike.

posted by: amorphous on 01.22.08 at 08:55 AM [permalink]

Here is a great article about German companies doing business in China.

http://www.newsweek..com/id/91613/page/1

So the country that is home to Friedrich List and industrial policy is actually successful while the us Anglo-Americans, having drunk deeply of the 'Free Trade' Kool-Aid, are seeing the real estate and financial services ponzi-scheme that make up our 'economies' collapse like a house of cards on the deck of the Titanic.

posted by: Mitchell Young on 01.22.08 at 08:55 AM [permalink]