23 August 2006

Club FED to swing Axe?

For anyone old enough to remember watching Hee-Haw, this is from the "Archie Campbell School of Economics".

Archie - "Didya see today's headlines Roy?"
Cousin Roy - "Naw Arch, naw I didn't"
Archie - "Well they said...

Existing Home Sales Plunge
Record UnSold Inventory

Cousin Roy - "Oh that's Bad"
Archie - "NO, no that's GOOD"...

Today's ugly numbers on existing home sales and inventory means that the FED has accomplished its task of taking "speculation" out of the US housing market. Except they may have done too good a job and now the speculators will turn to scavenging on mortgage defaults and foreclosures.

The only economic reason the FED has for increasing interest rates any further would be to 'defend' the US DOLLAR against foreign currencies, which simultaneously supports US TREASURY BOND prices.

Boxed in, the FED either defends the Dollar and further hurts the housing market by increasing interest rates (in the name of "fighting Inflation)...


it hurts the Dollar (and US bonds) by standing pat. (which does no further harm to the housing market which is key to the Xmas season US consumer spending due to "equity-extraction" debts)

The FED is the most powerful tool the "Powers that Be/Disciples of Rothschild" (Ptb/DoR) has in determining their preferred balance of power in the US Government. (just ask GHWB'41 about the consequences of Greenspan's % rate increases in producing the '91/'92 recession... remember candidate Clinton's "worst economy ever" line?)

Therefore, if the FED raises % rates at their Sept.20 meeting, part of their intent will be to produce a DEM victory in the congressional elections, and doubly so if they do it again on Oct.25. And the opposite (supporting the GOP) if they do not.

Only an unforeseen explosion in home sales during the next 6-10 weeks or more likely, multiple reports of greater than expected Inflation will compel the FED to raise % rates more.

Unless of course, they want a DEM takeover of the House/Senate and they're willing to produce a recession to get it.
I expect the PtB/DoR/FED will try to split the difference, costing the GOP control of the House, but maintaining the Senate with a smaller majority.
Just enough to scare the Bush Administration without ham-stringing it.