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 Economist's View

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gastaoss



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Registration date : 2007-07-01

PostSubject: Economist's View   Fri Aug 17, 2007 10:31 am

http://economistsview.typepad.com/economistsview/
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gastaoss



Number of posts : 440
Registration date : 2007-07-01

PostSubject: Re: Economist's View   Fri Aug 17, 2007 10:55 am

Tim Duy: Collision Coming
Tim Duy with more on how the Fed is likely to react to current economic conditions:

Collision Coming, by Tim Duy: Someone is going to get hurt bad, as financial market participants and Fed policymakers are barreling toward each other. Who will be the first to swerve? Whether the Greenspan put is real or not, markets are convinced that the Fed will flinch in the face of the ongoing panic. Is panic too strong? I think not, at least given the tenor of the financial press. From Bloomberg:

''People are losing faith in credit, so the economy is seizing up,'' said Biggs, 74, who runs the Traxis Partners LLC hedge fund in New York and was formerly a strategist at Morgan Stanley.

Looking out the window, I sense “the economy is seizing up” is something of an exaggeration. There appears to be considerable activity at the local shops, my internet connection is solid, the electricity is on, etc. Some students appear unsteady on their feet, but I suspect this has more to do with post-summer finals revelry than impending economic collapse.

All joking aside, there is a real concern, and I can not say that I do not share it, that the situation is quickly getting away from the Fed. In my opinion, we are at a point where people no longer have the time to rationally analyze the incoming news, reacting to speculation and rumor rather than fact. Sounds like a good definition of “panic” to me.

The daily activities of the New York Fed, which have gone unnoticed for years, suddenly becomes an object of intense speculation about the intentions of the Fed. It is as if we have reverted to the days when the Fed did not announce policy decisions. Indeed, speculation is rising that the Fed has secretly cut rates already. Likewise, data analysis has become subject to exaggeration as well. I particularly enjoyed David Gaffen’s remarks from the Wall Street Journal’s MarketBeat:
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