Real Economic News
(Conspiracy Nation, 10/10/07) – Conflicting analyses of “Federal” Reserve minutes reports caused Conspiracy Nation to pay a whopping $1.50 for today's Wall Street Journal. There was a time when newspapers cost 10 cents and magazines cost 50 cents. This was in cave man days, before inflation was discovered.
The “Marketwatch” reported at 5:12 pm EST yesterday that “Fed” commentary in the released minutes “reinforced thoughts of another interest-rate cut ahead.” (“U.S. stocks rally to new heights on Fed minutes,” by Kate Gibson)
But the “Bloomberg” reported the “Fed” had “signaled they are in no hurry to reduce interest rates again” in their released minutes. (“Fed Signals No Rush to Reduce Rates Again as Economy Expands,” by Craig Torres. October 10, 2007)
So which is it? What is the Feral Restorative actually signaling?
WSJ opines, “The minutes offered no clues about the Fed's next move.” (“Behind Rate Cut, a Shift in Concern,” by Sudeep Reddy. October 10, 2007, p. A3 box)
In “Grocery Prices Don't Count” (http://www.shout.net/~bigred/Groceries.html), Conspiracy Nation had reported the price for a gallon of milk up 21 percent. The local newspaper, in one article, says milk prices are up 18 percent since the start of the year. In a separate article the same paper says milk prices are up 26 percent since summer 2006. This skyrocketing of milk prices, however, is somehow not counted as inflation.
For some reason, “they” cannot simply tell you what is going on. It may be “they” fear to worsen the situation by telling the truth. If Ben Bernanke, for example, were to say, “Holy sh**! It looks bad!”, things would deteriorate just by him saying that.
But Wall Street Journal (WSJ) offers little clues. The trick is, who has the time to wade through WSJ and decipher the meaning?
Here are some of the “little clues” from today's WSJ:
Strip-Mall vacancies are at a 5-year high, “spurring concerns about cutbacks in consumer spending.”
Banks are having trouble selling their leveraged buyout (LBO) loans. This is when one group wants to buy out another group. The buying team gets a loan from the bank. That loan gets packaged and offered to investors. The banks managed to sell 10 percent of their highest-quality LBO loans, and these were sold at discount (e.g., 96 cents on the dollar, in one case). The other 90 percent of LBO loans are still “in the pipeline,” i.e., investors are not beating down the doors to get them. To unload the remaining “in the pipeline” loans, the banks might need to have a “fire sale” (i.e., huge discounts).
Some retailers have entered “desperation mode.” The retailers outwardly smile and say, “It's just the weather which has hurt the fall/winter clothing sales.” But secretly, one “sign” of retailer worries is, “The West Coast's three largest ports reported inbound container volume in August down 6.6 percent from a year ago, compared with a 14.9 percent gain in August 2006.”
Treasury bond investors did not intuit any future rate cut when they read the “Fed” minutes. The prices declined yesterday “as investors turned increasingly skeptical about the possibility of a rate ease this month following the release of the minutes from the Sept. 18 Federal Reserve meeting.”
The above “little clues” were hunted down with a magnifying glass in today's Wall Street Journal. Another “little clue” was published in the local newspaper last week. A Freedom Of Information Act (FOIA) request filed by Ken Thomas of the Wharton School released documents hidden by the “Fed.” August 10th was “crunch day” of panic on Wall Street, according to Conspiracy Nation (“Figuring Out August 10th,” http://www.shout.net/~bigred/Aug10.html). The FOIA documents corroborate the analysis. On August 8th, two days previous to August 10th, Robert Rubin, former Treasury Secretary under Bill Clinton, secretly phoned Ben Bernanke of the “Federal” Reserve. This Rubin phone call took place one day after the “Fed” had left a key interest rate unchanged in August. “The information [in the FOIA documents] simply lists Bernanke's contacts through the day. It does not explain the content of those meetings or calls.” (“Documents show glimpse of chief's life during crunch,” AP, October 4, 2007)
These are some “little clues.” Another “little clue” is the more-or-less parity of the Canadian Loony with the U.S. Dollar. Readers are invited to monitor the situation at http://www.xe.com and see how it develops. Theorized is an effort to keep the two currencies at basic parity so as to facilitate adoption of a unified currency, possibly to be called the “Amero.” (For background, see “Latest Loony News (Noose)”, http://www.shout.net/~bigred/LoonyNews.html)
Spoiler Warning: Read no further if you do not want to see a future “Fed” rate prognostication.
If the Loony/Dollar theory is correct, the “Fed” will try to maintain parity with the Canadian currency. This presages the “Fed” will leave rates unchanged at their Halloween meeting.
Conspiracy Nation
http://www.shout.net/~bigred/cn.html