More FED Action
Stocks went sideways today – it’s been a long time since we’ve seen a sideways day. Nice to relax for a day.
Bonds, on the other hands, soared BIG today by dropping the interest rate 0.25% on the 10 Year Treasury.
The Dollar lost some more, as the Euro gained again. Gold went sideways today with no change.
Oil and gasoline fell significantly – giving back most of what was gained yesterday.
In the news today…..
The FED is starting some new programs for about $800B of your tax dollars to bailout the consumer debt, auto loans, and student loans. Paulson stated that these areas are blocked right now, and need to be freed up.
The 3rd Quarter GDP was revised from –0.3% to –0.5%. I projected when the initial estimate came out that the GDP was worse than stated, and I continue to say that now too.
There are now 171 problem banks according to the FDIC. The previous number was 117 banks in trouble. We’ll be seeing more banks going bankrupt. We’ll see some more SOB activity going on with the banks. That’s “Save Our Banks.”
The 2008 Federal Budget Deficit was $455B (money we owe), and the 2009 Budget Deficit is projected to be $1Trillion (that’s trillion). Obama said the deficit is “bigger than we’ve seen for a long time.” This guy needs an education. This is the BIGGEST we’ve ever seen.
Tonight’s Dinner Conversation…..
Iceland is currently having protests to get all the government officials to resign. Protestors have been arrested. The population is very unhappy that the big 3 Iceland banks caused the country to go bankrupt. Iceland now has a $2.1B loan from the IMF.
Why are there protestors? We don’t see that in the US!!!!! The price of a cup of coffee is now 33% higher than two months ago. That is a price that Icelanders are paying right now. It’s called “inflation.”
Tonight’s debate topic is “Could we ever see any protestors in the US that are caused by our financial crisis?” If you think so, what would have to happen to cause this?
Here are Today’s numbers:
Dow Jones 30 Industrial – 8479 (up 36 points)
10 Year Treasury Bond – 3.09% (down 0.25%)
Euro – $1.3062
Gold – $821 (no change)
Oil – $50.77 (down $3.73)
Gasoline – $1.09 (down $0.05)
I believe we could see protests here in the US at some point. Our financial crisis is different than Iceland’s but bad in its own way. Unemployment (U3) will rise all next year, we’ll see many retailers file for bankruptcy in January, and the remaining industries will see cut backs too.
We will feel worse next November/December at the year end than this year. That won’t be good for moral.
Our saving grace so far is that as the world’s reserve currency we can print away our problems better than Iceland.
David,
You’ve put your finger on the major difference between the US and Iceland economic remedies – our ability to print ourselves out of trouble. I think we actually are just deferring the inevitable – the need to pay the piper.
So, how long will the world allow the US to remain the world’s reserve currency? My bet is that a lot of nations quietly want us to continue because we have the ability and agressiveness to take action – any action – needed to save the financial system from a meltdown. A lot of nations couldn’t, or wouldn’t, take action – even though they talk a good talk – they really can’t walk the walk.
Tom
Tom,
Yes, there has a been a lot of talk regarding the USD remaining the world’s reserve currency. You are correct in stating that it is something we can’t force, other nations have to cooperate with us.
My sense is that as long as oil (energy) is priced in USD, then we’ll be ok. Who knows what would happen if major oil producing nations priced their crude in something other than USD. Yen, Euros, gold…?
I tend to agree that many nations want to keep the status quo for fear of change. It is hard to select another currency; most Asian countries don’t trust Japan enough to use Yen (WWII issues). Plus the Euro is new and could even break up back into individual currencies during the current depression. What’s left? No one is really going back to the gold standard after the luxury of fiat currency. Besides we have ground troops in Iraq and Afghanistan plus naval forces in the region. Gulf countries refusing to sell oil in dollars would be an act of suicide.
Thus, “when you have eliminated the impossible, whatever remains, however improbable, must be the truth.”
Hence continued dollar hegemony.