What Will the Fed Do?

After the Republic leadership in Congress sent a letter to Federal Reserve Chairman Ben Bernanke yesterday urging he and his fellow central bankers to refrain from any more monetary stimulus to aid the economy (and, not uncoincidentally, President Obama’s election chances), the Fed’s meeting today has gotten a bit more interesting.

See video link in Links.txt

The letter was signed by Senators Mitch McConnell and Jon Kyl along with Representatives John Boehner and Eric Cantor and, while they do make a few good points, such as, the dismal results of prior money printing efforts and the potential for further intervention to harm the U.S. economy, it was rather unusual (unprecedented?) and bordered on bullying.

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Zombie Housing Market Not Yet Ready to Rise

The Commerce Department reported(.pdf) that housing starts fell in August and permits for new construction rose, however, instead of showing the same old chart of how the residential construction has been dead and will likely continue to be that way for the foreseeable future, this approximation better expresses the current reality.

When looking at the actual data below, it’s clear to see that there’s not a whole lot of difference between the two charts, the only real question being if and when a zombie housing market will someday arise.

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I have no idea who this guy is, but he ties together a few timely news items – the budget debate, class warfare, and the effort to occupy Wall Street that he dubs the “American Spring” – before inviting President Obama to participate.

In related news, it’s not clear if this will help or hurt (my guess is the latter), but Roseanne Barr just made a surprise appearance at the protest, apparently not having anything good to say about either Ayn Rand or Rush Limbaugh – here’s a link.

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The U.K.’s Guardian newspaper files this report on the effort to occupy Wall Street over the weekend, a move that extended into the workweek earlier today.

On Saturday 17 September, many of us watched in awe as 5,000 Americans descended on to the financial district of lower Manhattan, waved signs, unfurled banners, beat drums, chanted slogans and proceeded to walk towards the “financial Gomorrah” of the nation. They vowed to “occupy Wall Street” and to “bring justice to the bankers”, but the New York police thwarted their efforts temporarily, locking down the symbolic street with barricades and checkpoints.

Undeterred, protesters walked laps around the area before holding a people’s assembly and setting up a semi-permanent protest encampment in a park on Liberty Street, a stone’s throw from Wall Street and a block from the Federal Reserve Bank of New York.

Three hundred spent the night, several hundred reinforcements arrived the next day and as we write this article, the encampment is rolling out sleeping bags once again. When they tweeted to the world that they were hungry, a nearby pizzeria received $2,800 in orders for delivery in a single hour. Emboldened by an outpouring of international solidarity, these American indignados said they’d be there to greet the bankers when the stock market opened on Monday. It looks like, for now, the police don’t think they can stop them. ABC News reports that “even though the demonstrators don’t have a permit for the protest, [the New York police department says that] they have no plans to remove those protesters who seem determined to stay on the streets.” Organisers on the ground say, “we’re digging in for a long-term occupation”.

There is much more in this piece and via a related Google News search. While I’m not holding my breath, we can at least hope that this might lead to an awakening of some sort in the U.S., akin to the Arab Spring. Then again, there’s probably little chance of that happening – at least not until the economy gets much, much worse.

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The “R-word” Index

The Economist’s Daily Chart provides confirmation of what most people already seem to  understand – that another recession is, if not already here, on its way.

In case you hadn’t noticed, never before in the last two decades has the index been this high outside of a recession. In fact, it is now higher than it ever was back in 2001.

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Two Very Different Ways to Move Forward

[This will conclude the most recent dive back into the archives (Boy, I sure takes a lot of time off lately...) as we look at two very different recommendations about how the nation might move forward from its late-September meltdown, one that didn't really finish melting until about six months later around the time that Fed Chief Ben Bernanke launched the first round of quantitative easing. Bank bailouts and an economic stimulus program amounting to over $1.5 trillion weren't enough, it finally took money printing on a grand scale to reverse course. Originally published on September 26th 2008, former Fed Chief Alan Greenspan and Representative Ron Paul (R-TX) talk about the road ahead.]

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Former Fed chief Alan Greenspan and Congressman Ron Paul (R-Texas) were both in the news today describing two very different ways to move forward from the current financial market predicament. In this report at the WSJ Economics blog, Dr. Greenspan favors the “more is better” approach to fixing what’s wrong.

We do not take a stand on the choice of institutions eligible for emergency assistance. Rather, we urgently advocate immediate, extensive action that would maintain the functions of credit markets and prevent a serious economic contraction.

We are deeply concerned about instituting reforms for the longer run that will prevent similar crises in the future.

Ron Paul, on the other hand, sees such heavy handed intervention as part of the same pattern that has brought us to the current juncture.

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