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alstry (36.49)

Will An Interest Rate Cut Help?

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14

October 05, 2008 – Comments (8)

Now that the bank welfare plan is behind us.......and nothing happened....  Expect an expected interest rate cut to be the new salvation.

Will it help???  Not a chance!!!!  Maybe we might see a shot term spike in the market but in the long term things will be much worse.

Fewer will want to hold treasuries causing prices to fall and real rates to go up.  In addition, expect any devaluation in the dollar to more than offset any benefit from a rate decline.

Once you give politicans a shovel....it is amazing how deep they can dig our economic grave.

Cut rates....raise prices......hmmmmmmmm.

Just so you understand...the problem is not too little money to lend.....it is too few borrowers capabable and/or willing to borrow.  We juiced our economy by extending trillions worth of credit to millions who were not qualified....now our economy is out of juice.  You think lowering rates a point or two is going to make a difference???  It will only devalue the dollar and raise the prices on almost everything we buy.

Despite my warning....expect the drum beats to get louder and louder.

How many of you are looking forward to 90% tax rates to pay for Bush's ADDITIONAL $5 Trillion of Debt plus Trillions accumulated at the State and Local levels?

Sure, cut interest rates a percent or two but DOUBLE our taxes.....You have been warned.

8 Comments – Post Your Own

#1) On October 05, 2008 at 11:19 AM, dinodelaurentis (78.70) wrote:

alstry,

   had you noticed the decrease of the number of your critics in the last 3 weeks?

i have.

funny how quiet things get in the room when you hear a round being chambered...

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#2) On October 05, 2008 at 12:42 PM, awallejr (77.23) wrote:

I just get tired of repeating the same old criticism of his exaggerations.  Predicting increased taxes the year after an election year is a no brainer.  It happens all the time.  And yup credit card defaults will continue to scale up but again that's a no brainer.  Did the same thing after the 1980's housing crash too.

What the interest rate cut will produce is to ultimately encourage inflation, which is what we need in the end.  Not spiraling inflation, and not just price inflation, but wage inflation.

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#3) On October 05, 2008 at 1:04 PM, daayoo (< 20) wrote:

The politicans favorite form of taxation will be inflation. Wage inflation will not occur because the global economy makes high American wages non-competitive. Get ready for huge pain in the U.S.

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#4) On October 05, 2008 at 1:22 PM, Ph1sh55 (28.84) wrote:

When has there ever been inflation when housing prices were tanking?

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#5) On October 05, 2008 at 2:27 PM, alstry (36.49) wrote:

awa,

I think you will eventually find my forecasts conservative.  Very conservative.  Nothing about what is coming will be like anything you have experienced before. 

We all know credit cards will be an issue.  So will States, Cities, Counties, Hospitals, Businesses, Individuals, School Districts......and a variety of other entities.

I post simply to inform you of what is coming and hopefully give you a heads up when few are willing to publicly state the information provided.

There are others besides me who see what is coming...and you will too.....hopefully before its too late.  But in the end we all live in the same system....when the system fails.....we all fail.

Until you appreciate the magnitude of the problem....you won't know how to deal with it.

In the mean time...get ready for the interest rate cut parade....it won't do a thing.   Niether will raising taxes....because few will be able to afford to pay taxes.  Not much helps at this point.....except restructuring......the sooner the better.

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#6) On October 05, 2008 at 2:57 PM, schlottman (< 20) wrote:

Rate cuts, probably, but as the crisis worsens Washington will really start to dig us in a hole.  How about bailing out each and every industry which begins to sway.  Washington is not nimble enough and lacks the overall ability to make the unpopular financial decisions to stop the bleeding.  This is overwhelmingly true in an election year.  A fact proven by the past week.  We voted against it as and then made it worse with a tax cut in order to pass it?  Even with Regan's deficit spending policies we never took in more tax reciepts than what the spending cost. What did this do but did our hole deeper? 

The fact that this historic meltdow occurs in an election year has the potential to result in uncomprehensible harm to our future viability.  We continue to let our politicians throw good money after bad.  How can we possibly bail out the world as their plan requires?  Eventually a debtor must either repay the debts or file bankruptcy.  As for paying this off, this deficit spending bailout, even if it had the potential to work, now requires us to forfeit our future growth for generations to pay off this debt.  Watch now as the financial institutions which this benfits leave for greener pastures as does not root them into investing in the US.   

Given our system of government the people at some point will give the finger to the idea of paying off anyones debt but their own?  So where does this leave us?  Either war or bancruptcy or both.  Either way, there will be nothing left and no one to borrow from when we really need it.  The irony of this is will be the amount to pay off 50% of each and every mortgage loan which originated in this bubble and started this ship sinking will be a very small number compared to both what is eventally spent and the financial losses the American public will sustain.   

awallerjr "predicting increased taxes the year after the election is a no brainer", if you were paying attention, this is no ordinary "increased taxes".  This is the mother of all increases to taxes.  Comparing this to the 1980's housing crash shows you are not paying attention.  We surpassed the magnitude of that crash a long time ago and we are only gaining downward momentum.  Stopping and then repealing any of this damaging legislation should be the goal if we were doing something for the people. 

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#7) On October 05, 2008 at 3:00 PM, schlottman (< 20) wrote:

Rate cuts, probably, but as the crisis worsens Washington will really start to dig us in a hole.  How about bailing out each and every industry which begins to sway.  Washington is not nimble enough and lacks the overall ability to make the unpopular financial decisions to stop the bleeding.  This is overwhelmingly true in an election year.  A fact proven by the past week.  We voted against it as and then made it worse with a tax cut in order to pass it?  Even with Regan's deficit spending policies we never took in more tax reciepts than what the spending cost. What did this do but did our hole deeper? 

The fact that this historic meltdow occurs in an election year has the potential to result in uncomprehensible harm to our future viability.  We continue to let our politicians throw good money after bad.  How can we possibly bail out the world as their plan requires?  Eventually a debtor must either repay the debts or file bankruptcy.  As for paying this off, this deficit spending bailout, even if it had the potential to work, now requires us to forfeit our future growth for generations to pay off this debt.  Watch now as the financial institutions which this benfits leave for greener pastures as does not root them into investing in the US.   

Given our system of government the people at some point will give the finger to the idea of paying off anyones debt but their own?  So where does this leave us?  Either war or bancruptcy or both.  Either way, there will be nothing left and no one to borrow from when we really need it.  The irony of this is will be the amount to pay off 50% of each and every mortgage loan which originated in this bubble and started this ship sinking will be a very small number compared to both what is eventally spent and the financial losses the American public will sustain.   

awallerjr "predicting increased taxes the year after the election is a no brainer", if you were paying attention, this is no ordinary "increased taxes".  This is the mother of all increases to taxes.  Comparing this to the 1980's housing crash shows you are not paying attention.  We surpassed the magnitude of that crash a long time ago and we are only gaining downward momentum.  Stopping and then repealing any of this damaging legislation should be the goal if we were doing something for the people. 

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#8) On October 05, 2008 at 3:37 PM, awallejr (77.23) wrote:

Do yourself a favor and go to yahoo, click interactive map for dow and use a start date from Oct 1928.  Since 1932 (after many regulatory changes) the trend for the market has been up.  With up/down swings, but still up.  And what will prevent the DOW from tanking to degrees people have been throwing out (3000, 4600, 5200 etc etc) is a century of inflation.  It is as simple as that.

The trillion dollar decline this passed monday didn't mean 1 trillion dollars poofed.  It simply left the market and went to other places.  That money is still out there, and if you had GE selling for $3 believe me that money would flow back in.

Unemployment is going to continue to rise because companies are cutting back as normal in a recession.  Taxes are going to go up because, guess what, they ALWAYS do (except in election years where the politicians throw some bones).

World economies are slowing down because a) they basically rely on the US to sell to and b) their banks were banging up the interest rates to slow down their inflation rate and hence their economies.

Eventually the housing market will reach a point of demand equalling supply and then surpassing it.  This will happen after prices correct some more because they are still over valued.  Quicker they drop, actually the better.  I've been saying 2010.  It is possible mid 2009 if this Rescue Plan actually works.

Alot of people are going to get hurt.  That always happens in recessions.  But stop with the Great Depression arguments because the comparisons simply aren't there.  Have any of you even lived through a dustbowl?  No.  Today with modern technology we have advanced irrigation systems and even sea water conversion plants.  They didn't back then.

We have plenty ways to revamp the economy.  Its just a question if congress has the guts to make the necessary changes and stop pandering to lobbyists.  Those who lost manufactoring jobs can be switched to energy conversion plants (nat gas to fuel already), and really needed public works programs, for example.

 

 

 

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