Comments on: Trichet 3, Bernanke 0

By: Henry

Henry — Sun, 08 Jun 2008 10:35:06 +0000

Thursday and Friday action seemed odd. Several points:

1. OK, so if Eurozone interest rates go up, that’s likely to cause the dollar to drop against the euro. But wouldn’t Europe’s economy tank, lowering demand for oil? So why did oil shoot up on Thursday?

2. Oil shoots up on Thursday and the US stocks jump up. Then oil shoots up on Friday and US stocks collapse. Huh?!?!?!

Mofaz’s threat to attack Iran spooked people on Friday, so I guess I can understand the jump in oil prices and the drop in stock prices on Friday (plus the bad unemployment numbers, of course). But the action Thursday was strange.

By: me

me — Fri, 06 Jun 2008 14:31:43 +0000

“I like BB — I think he got stuck cleaning up easy Al’s mess, and has responded rather creatively to the credit crunch.”

BR looks likes Mr. Lacker doesn’t agree.

By: shtove

shtove — Fri, 06 Jun 2008 02:44:53 +0000

Brilliant cartoon, except … shouldn’t the sheikh on roller skates be wobbling as he starts to tumble on the opposite side?

By: Steve Barry

Steve Barry — Fri, 06 Jun 2008 01:48:33 +0000

Jonathan,

The Fed is not really scared of run of the mill recessions, except in that it may hurt their boss’ party’s chance at re-election. But look at what this Fed’s problems are…housing is still 40% above high levels, let alone normal levels…credit issued over the last 40 years is unimaginable…inflation adjusted Dow way above trendline, near 1929 levels. So even thought there really is no hope, the only thing they can do is try to INFLATE out of it…pay back the debt with cheaper money…re-inflate housing…inflate the Dow. The only way they can do that is pretend to be deathly afraid of a recession and lower rates.

By: don

don — Fri, 06 Jun 2008 01:11:04 +0000

My take is that a big part of the oil price gain came from the performance of Walmart and Costco, which seemed to show that the U.S. consumer will continue to spend beyond his means.

By: J. Bridges

J. Bridges — Fri, 06 Jun 2008 01:01:08 +0000

I don’t know, the more confident the bulls get, the better the odds a big fat Black Swan is going to come along and restore some balance to this Fed backed casino.

By: J. Bridges

J. Bridges — Fri, 06 Jun 2008 00:24:16 +0000

“I see so many signs of unfair trade practices in various stocks I used to trade (note the past) that I have no option but stand back and watch. I won’t play the game if I don’t know the odds…”

This is what happens when the Fed gives the lunatics the keys to the asylum. We don’t even have markets anymore. Just a big stinking casino with 2% margin rates on any garbage you want to pawn for 28 days.

Frankly, and I hate to say this, but I’d like a big fat Black Swan to sit right Wall Street right about now.

By: mhm

mhm — Fri, 06 Jun 2008 00:12:24 +0000

I see so many signs of unfair trade practices in various stocks I used to trade (note the past) that I have no option but stand back and watch. I won’t play the game if I don’t know the odds…

By: RichardN

RichardN — Fri, 06 Jun 2008 00:02:27 +0000

Why is this so hard to understand? Trichet couldn’t care less what oil does in response to what he says. His job is price stability (monetary). That’s it. If that causes the euro to appreciate, then either oil goes up by roughly the same amount as the dollar depreciates (in a perfect world) or it does not. If it does not, there are only two possible reasons ( aside from short term effects, supply etc). Either speculation is pushing the price, in which case the price of oil will, in the long run, revert to its true value and there’s no point in him trying to mess with it, it’s not his job (it should be someone else’s job though); or there’s a supply and demand imbalance, in which case no matter what he does the price is out of his control. Clearly, speculation is to blame for a 6% parabolic move on a 1% dollar decline.
What would you have him do?
Let’s say he does what you suggest and hints at lowering rates instead and that it causes the reverse of what happened today. If it’s speculation driving prices there would be some other excuse given the following day to explain a 4$ gain. This would go on until the bubble popped, only it would pop much higher because now you’d have excess liquidity in the US _and_ in Europe. Congratulations, your smart policy just screwed an additional 450 million people.

By: Marcus Aurelius

Marcus Aurelius — Thu, 05 Jun 2008 23:45:54 +0000

BB’s going to want best 5 out of 7.