Tuesday, 15 July 2008

Forget inflation, stabilize the markets

The toleration of inflation is becoming fashionable. Stabilizing financial markets and avoiding recessions are more important than keeping the lid on inflation. There is no trade-off between inflation and growth. Financial markets shrink and die when inflation takes off. Are these lessons that we need to learn again?

Other storied focus on the fact that Freddie and Fannie are now safe, but Citigroup has gone dangerously mysterious.

Read on; each day seems more depressing than the previous one.

Avoid interest rate hikes and inflation will kill you

I despair when I read stuff like this. Kate Barker is warning the MPC "must guard against keeping interest rates too high for too long and from tipping Britain's economy into a slump as it fights to curb inflation, one of its most influential officials says today." Did Ms. Barker clock yesterday's producer price data. Yes, there was another digit after the one. Yes, it did say 10 percent inflation.

Citigroup's $1.1 Trillion in Mysterious Shadow Assets

The title of this Mish blog post was just too scary. I couldn't read it. I simply could not soak in the idea that Citigroup could be holding $1.1 Trillion of shadow assets. It is too much mystery for me. Someone else read it for me and tell me that it will all be OK.

Why the Fed should ignore inflation

More stupidity on show; this time from CNN. It seems that the Fed should calm markets and leave the fight against inflation until later. Oh no, inflation doesn't destabilise financial markets. Savers will just accept negative interest rates and give the Fed time to sort out Freddie and Fannie.

Why do bankers never have to suffer?

Good question. Unfortunately, the Mail does not have much of an answer.

Depositors queuing up for their money

This looks familiar. NRK meets California.

CDO's are back

A few brave hedge funds are dipping into the CDO market and buying. Good luck with that, I say.

The toleration of inflation is becoming fashionable. Freddie and Fannie are safe, but Citigroup has gone dangerously mysterious.

Depositors queuing up for their money

This looks familiar. NRK meets California.

The largest bankruptcy in Spanish history announced

Yes, it is a real estate company.

CDO's are back

A few brave hedge funds are dipping into the CDO market and buying. Good luck with that, I say.

Don't Panic - Freddie and Fannie are safe

I saw a couple of these "the GSE bailout isn't a big deal" stories today. Here is the one from the WSJ. As they see it - "the Treasury and the Federal Reserve announced they would take steps to prop up the two corporations if and as needed. So there is no reason for stock market panic." It reminds me of that old line from John Kenneth Galbraith. In the United States, the only respectable form of socialism is socialism for the rich.


Josh said...

Socialism for the rich - I like it.

CWS said...

Inflation will eat the poor.

passer-by said...

Most but not all of the stories
in this post seem to be there twice.

charles stuart said...

Up here in the garret we have tv and often especially at yuletide they show this really great old movie with James Stewart and Donna Reed.

Course everyone's seen it dozens of times - old time savings and loan threatened with a run, saved by Stewart and the bell. Bad guy Lionel Barrymore wants to buy it out and close it so ordinary people can't afford to buy their own home but have to rent from him.

Then a 'credit crunch' - 'solvency crisis' or is it fraud - the money has disappeared (lost) (taken away by the bad guy). Stewart is bereft and jumps in the river - he nearly sells out!!

In the end though an angel steps (jumps) in and... well you know the rest - everybody digs deep in their pockets to find the money to bail out the bank!

It's set 60 years ago and nothing like it could happen today. But as we sit here, dreaming up art stuff like paintings and video wheezes, me and Opkins (the mouse) and Spider (the spider) don't feel as secure as we used to . No sirree not quite as secure as we used to.

Anonymous said...

CPI 3.8%. What worries me is that the Bank of England had a policy and set a rate two years ago that was expected to deliver a 2% rate of inflation now. I don't have a lot of confidence in their current predictions for inflation in two years time based on their past record.

Anonymous said...

Those that voted for 4%+, I bet they also believe the world will end in 2012.


Anonymous said...

more like going back to feudalism

Anonymous said...

inflation eats the stupid middle class

Anonymous said...

glad i sold my houses and bought gold

sobers said...

There is only one excuse for the MPC not raising rates in the face of such inflationary data, and that is that they know the banking system is still teetering on the edge. A raise in rates could be the straw that breaks the camel's back.

dearieme said...

Eat the poor - they're fatter.