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At What Cost another 50 basis point Rate Cut?
Keeping the Wall Street boys happy with another 50basis point rate cut is next to a done deal... but at what cost?  It's no secret that I am "hawkish" in terms of sound fiscal policy and natural consequences, so take this for what it's worth...
The cost of more rate cuts:
...further weakened dollar:  mortgage rates will rise significantly due to mortgage backed securities devaluation.
...Imported goods will become more expensive:  China and Asia's economy will suffer, fewer dollars to be spent supporting our bond market (once again, not good for our mortgage rates).
...Inflation:  the genie is almost all the way out of the bottle at this point, it won't be pretty at all.
...Oil will exceed $115 per barrel, how about $5 at the pump, huh?  If we were to take the dollar's value from 2004, the cost of a barrel of oil would be under $50!  Sure, lets do another rate cut, super idea!
...The piper must be paid: natural unwinding (imploding of unsound companies) will be delayed which will result in bigger financial crisis.  The bond insurers are next to go down, Commercial CDO's are going to take a huge hit, and the ratings agencies are going to face lawsuits like you wouldn't believe.
Pay the ... more

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