GREENSPAN: Outlook for rates depends on recession....

GREENSPAN: Outlook for rates depends on recession....

GREENSPAN: Outlook for rates depends on recession probability

Provided by: Market News International

(visit the link for the full news article)

Greenspan is now talking about the probability of a recession in the US, not even the 'possibility'.

With the dollar tanking across the board, war costs spiralling, housing market collapsing and 30 trillion of near valueless OTC derivatives yet to tackle, looks like a recession is more a certainty than a probability!

Sorry no link, came out on wire service just now

[edit on 2-10-2007 by RogerT]

However, the stock market makes yet another record high in the Dow .... gotta love those liquidity injections!!

Unfortunately, if the Fed continues to cut rates in order to maintain "adequate liquidity" within the financial system, recession becomes more and more likely...

Rates need to be kept on hold, with bias toward tightening if there is any hint of inflation moving above 3%...

Some people are just going to have to take their medicine, go thru a mild recession in order to stave of a much more severe downturn which would hurt far more people...

Peace

Liquidity is being injected into the financial system by central banks all over the world, it's not just about the rates. European CB's are now recanting and saying they will join the fed in this new round of the Bernanke helicopter drop.

The liquidity can not be drained from the system, so inflation is guaranteed down the road.

It looks like the Weimar Republic all over again, with the dollar heading towards zero and the stock market heading towards infinity

It's one way to wipe out your international debt, but a very unpleasant one for your own population ... but then when did the bankers et al ever care about the population.

It's gotta stop at some point, but I doubt it will be as gentle as you suggest it could be.

reply to post by RogerT


It will be interesting to see if the Fed can somehow engineer a soft landing by raising rates gradually...Stock market also has to correct 25% or so, gradually...The USD, I honestly don't know what the answer is there...

However, raising interest rates should put some support underneath it, make it more attractive to lower interest rate countries (like Japan)...

It seems the US economy hasn't benefited as much from world wide economic growth the last 5 yrs or so like the resource based economies (Australia, Canada)

Seems the US has also suffered a lot as a result of its manufacturing sector being outsourced to nations where labor is cheaper, more so than many other economies...

Peace

reply to post by Rilence



I'd say that raising rates will be the final nail in the coffin of the housing market.

Also this would put homeowners under more and more pressure from their over-extended debt positions and further undermine consumer spending which is one of the prime driving forces of the US economy.

I can't see any way out of this, and it appears the fed can't either. Injecting liquidity is just pushing the problem down the road a bit and pouring gas on the flames.

reply to post by RogerT


Yep, agreed Roger...Just delaying things for a bit...Its a terrible shame ordinary folks are going to be burned badly over this...I mean sure, if you borrow money you should be realistic about what you can afford if rates go up and so on...

But human beings have dreams, and if they're offered their dream in the form of their own home, they don't think of the consequences...

And that doesn't excuse some of these lenders from their ethical responsibilities...I'm sure some in the loan brokerage business in the US and certainly in Australia have acted far from ethically, tending toward illegally...

The whole thing needs a big shakeup, sadly...Those who overextended themselves get foreclosed, and the businesses who lent them the money to begin with will go under...

A perfect example of this is RAMS Home Loans here in Australia...It is easily the largest sub-prime lender in Australia...Listed on the stock exchange on July 27 @ $2.50 per share (market cap = $890 mill)..

Today was sold to a large bank here for $140 million..

Fortunately this is the exception in Australia, but I see scenarios like this have been and will continue to unfold in the US/UK

As I said, its just sad for ordinary folks to lose almost everything...

Peace



[edit on 2-10-2007 by Rilence]

The real inflation is near 10-15% in the US. The fed's numbers are cooked. I live in Canada and the worst of it all it's that our economy is tied to yours and as the US dollar sinks, our dollar must sinks too because if not, we will lose all our jobs... So I'm quite pissed off at your country for what it is doing.

Well as the worlds largest economy goes into a 'probable' recession and the Chinese and Indian economies still growing at close to double digits, it makes you wonder how much steam is left in the American engine as the world economic leader.

I give it less than a decade