Did anybody else think it was a little ERIE this morning when President Bush was on ONE CHANNEL saying we're NOT headed toward a recession... (maybe he agrees with me that we're already in one?)
AND SIMULTANEOUSLY Ben is giving testimoney (on CNBC) to the Senate Banking Committee that, "The U.S. economy expanded less than forecast (only 0.6%) in the fourth quarter as domestic spending declined and only an increase in exports prevented an overall contraction."
Are these guys living on different planets???
Bernanke did say that the Fed is going to continue easing as necessary, but frankly, he's way behind the curve, and efforts so far to ease the credit crunch have not worked. I actually think Meltzer's Opinion letter this morning in the Wall Street Journal nails it; calling it That 70's Show
"Is the Federal Reserve an independent monetary authority or a handmaiden beholden to political and market players? Has it reverted to its mistaken behavior in the 1970s? Recent actions and public commitments, including Fed Chairman Ben Bernanke's testimony to Congress yesterday -- where he warned of a steeper decline and suggested that more rate cuts lie ahead -- leave little doubt on both counts.
An independent central bank is supposed to maintain the value of the currency and prevent inflation. In the 1970s and again now, Federal Reserve officials repeatedly promised themselves and each other that they would lower inflation. But as soon as the unemployment rate ticked up a bit, the promises were forgotten.
People soon recognized that avoiding possible recession overwhelmed any concern about inflation. Many concluded that inflation would increase over time and that the Fed would do little more than talk. Prices and wages fell very little in recessions. The result was inflation and stagnant growth: stagflation."
click here for the rest of the story... Although I'm a lender that could use a few months of rates below 5.25% - I don't see that happening simply because the Fed lowers short term rates. IMHO until there's a DEMAND for mortgages, rates will continue to stubbornly sit above 5.5%. With inflation concerns very real - why should the Fed rush to lower rates NOW?
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