Serious Job Losses....

MondoTrader · Mar 8, 2003

many people who have maintained their jobs and incomes are in denial about the state of the job market.

many people who own inflated homes are in denial about the housing/construction bubble.

However, things are not as bad as Fleckenstein and company are saying, they are talking depression and that is primarily to sell copy and maybe make a little extra on their short positions.

chasinfla · Mar 8, 2003

this ain't Japan. though the analogy isn't lost on me.

lescor · Mar 8, 2003

I'm not an economist and I can't make an educated guess on where the economy is headed. Stocks however do not necessarily mirror the economy and can go wherever supply and demand take them. I agree, the US is not Japan and the cultural mindset is different enough that I doubt things would ever get as bad in America. And a 1930's style depression is an even greater stretch.

But just based on hope, complacency, historical p/e ratios and technical analysis, the stock market has a long way to go before a solid bottom is in. Just look at p/e's. At bear market bottoms stocks are generally undervalued, meaning the market overshoots on the downside when everyone has given up hope. If you look at how far we overshot on the upside at the top, the mirror image of that isn't anywhere near the 16 or 20 or whatever the mean is now on the S&P.

But I'm preaching to the (mostly) converted here. It's the Larry Kudlows of the world and all the people who listen to him that will suffer.

dis · Mar 8, 2003

Quote from chasinfla:

how has the fed 'lost control over monetary policy?'

With the U.S. current account deficit approaching $500B/year (http://www.clevelandfed.org/research/ETCurrent/Current/curracc.pdf), the Fed can not afford to raise rates to support the greenback and stem capital outflows. At the same time, the Fed has precious little room for rate cuts to stimulate the economy. In essence, the Fed has been relegated to the role of a passive observer.

scalping_dimes · Mar 8, 2003

Well, I'm here to tell ya--as a Real Estate broker--times are hard here in Atlanta. Especially the $250K and up business.

chasinfla · Mar 8, 2003

Quote from dis:

With the U.S. current account deficit approaching $500B/year (http://www.clevelandfed.org/research/ETCurrent/Current/curracc.pdf), the Fed can not afford to raise rates to support the greenback and stem capital outflows. At the same time, the Fed has precious little room for rate cuts to stimulate the economy. In essence, the Fed has been relegated to the role of a passive observer.

Thanks for clarifying.

I don't mean to nitpick, but it sounds like the Fed has as much control of monetary policy as it ever had. What it lacks is control over the results of its policy, and it really never had much of that, after all. Even the Chair would agree that the Fed's role is not to control the results, only influence them.

The well being of any economy is in the hands of the players.

TGregg · Mar 8, 2003

Quote from dis:

With the U.S. current account deficit approaching $500B/year (http://www.clevelandfed.org/research/ETCurrent/Current/curracc.pdf), the Fed can not afford to raise rates to support the greenback and stem capital outflows. At the same time, the Fed has precious little room for rate cuts to stimulate the economy. In essence, the Fed has been relegated to the role of a passive observer.

I apologize if I misunderstand, but if you are suggesting that since the Fed cannot lower the fed fund rate, therefore they are powerless, I must disagree.

I've always thought of the rate as the Fed's way of talking to the public, isn't this just the interest rate at the overnight window, where they kinda frown at banks who borrow (like saying "ya sure we don't need to come on over and check out your books?")

If nothing else, they can certainly print more money (either using the fairly straightforward auctions and reserves, or other possibly less ethical ways). I'd hate to see it, but the Fed could certainly inflate M1-M3. Well, maybe not hate it so much, my house hasn't appreciated much

.

chasinfla · Mar 8, 2003

Quote from TGregg:

Well, maybe not hate it so much, my house hasn't appreciated much .

it was all well said, but this was a great example of saying what everyone's thinking but not saying.

Cesko · Mar 9, 2003

I'm not an economist and I can't make an educated guess on where the economy is headed.
I don't think anybody can. Not even people on this thread!