Monday, August 27, 2007

The Fed fiddles while housing burns

After messing with 1 day, 3 day, 14 day, and 30 day paper, and persuading the banks to borrow at the punitive rate from the discount window; and then accepting various forms of paper for their IOUs, and changing collateral for banks and brokerages, then easing the collateral that the NY Fed will accept, so somebody will take some mortgage paper, the erudite Fed thought they could buy themselves 30 days.

They were wrong.

Now the financials trade heavy; worries abound in housing, and the Fed and it's governors are looking at the data for any spillover weakness in the economy.

It's obvious to anyone outside of the government what's wrong; but the abc's of fed policy is really wrapped up in the ECB. That is: Will the ECB leave rates unchanged on September 6th? That's the cover the Fed is looking for, as any good governmental employee does; to observe protocol and make the cut September 20th at the regularly scheduled meeting.

So the over/under on the cut in the cheese is 24 days. Place your bets at the fed futures. But the economy is already starting to stink, and the smell isn't Limburger cheese.

What does that mean? Well in a previous post I said Bernanke, has to quit snaking around, be a mouse, and take the sliver out of the paw of the lion, and cut rates. But he's done everything but cut the federal funds rate. Why?

What's Mighty Mouse's only weakness?

Limburger cheese!

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