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The Big Free.ze


We're in it together (picture source)




October 30, 2007


Financial Sense yesterday: Adrian Ash points out that the UK has problems similar to America's, and draws comparisons with the economic situation of the 1970s. That word "stagflation" is being spoken again. He's another gold bug.

Frank Barbera looks at the ongoing credit crunch, with Structured Investment Vehicles looking for a rollover investment of ?100 billion within the next few months, just as the market in commercial paper is drying up:

Bottom Line: It is simply a long way from over. So what do investors do while trying to make an honest buck? The answer is to expect more turmoil and periodic severe bouts of selling pressure rippling through the financial markets. We are looking at the battle between monetary reflation and debt deflation playing out on the grand stage.

Other bears look at the Thirties for their model. We have an advantage, in that we have the 70s and the 30s to learn from; they didn't have themselves in their history books. As Mark Twain said, "The past does not repeat itself, but it rhymes." 

Pig Bang.  

The US Double-Bubble Trouble.

What can the Fed really do?


I don?t understand how the Fed?s control of overnight inter-bank lending rates affects mortgage rates. They are very different kinds of lending. Why would a bank agree to lower mortgage rates just because it can borrow overnight from another bank for less?

And I have seen that long-term mortgage rates actually went up when the Fed last cut the inter-bank rate. So the mortgage market is clearly independent of the Fed to some degree, at least for long term rates.

Maybe the bigger power of the Fed is its ability to accept bad mortgage-backed bonds as collateral for emergency lending.

Can anyone explain the Fed?s power over mortgage rates in a minimum number of words?


05:09 From: rhawk301

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