Senate Bears Thread - Global Meltdown in Financial Markets

I hardly noticed that one, though I was in high school at the time.

 

I would not be surprised to see 2 quarters of negative growth and some additional weakness in the job market.

 

Wait what? Second quarter GDP was strong at +3.7. Where did you get -.2 from?

 

Wait, sorry...

You do quarters for the calendar, not financial year?!

June qtr should be Q4...

 

Actually it would be Q3 for how the US Government runs its fiscal year, but the BEA reports it as Q2, probably since US listed companies overwhelming have fiscal years that match the calendar year.

 

Ah ok. Companies do that - many here run Sept-Sept for results. But if you're talking macroeconomic indicators I'm surprised they go by anything but fin year.

 

...annnnnnd the Fed Funds rate will stay at zero.

Nothing to see here. Move along. Move along.

 

Good decision. It would have hurt the economy more than helped.

 

I don't know about you, but I'm ready to load up on revolving credit again.

 

http://www.economist.com/blogs/buttonwood/2015/09/markets-and-economics

Markets and economics

Global concerns mean the Fed leaves rates unchanged

Sep 17th 2015, 18:24 BY BUTTONWOOD

THE world will have to wait for the first American rate increase of the Twitter and iPhone age. Citing concerns about the global economy, the Fed decided to leave rates unchanged at 0-0.25%. Jeffrey Lacker was the one Fed governor to dissent, arguing for a quarter-point increase.
In the run-up to the announcement, investors seemed to have anticipated the Fed's inaction but markets were initially concerned by the tone of the statement. The Dow Jones Industrial Average and the S&P 500 bounced around as investors absorbed the news, before moving higher as Janet Yellen expounded on her views during the press conference. But bond yields fell with the 10-year yield dropping from 2.26% just before the announcement to 2.22%, and the 2-year yield falling from 0.775% to 0.7%.

​

The medium-term casualty of the announcement will be the dollar. The greenback had been strengthening for much of the year (see chart) on the expectation that higher rates would attract foreign capital. But the dollar dropped against the euro and the yen in the absence of higher rates.
In a sense, the statement may add to investor uncertainty. Rather than looking simply at the domestic economy, the Fed is now taking notice of global developments. But that makes it harder for investors to assess which data to monitor and when the Fed will consider the global backdrop has improved. Further volatility is probably ahead.

 

Look to be honest, I just don't know. One of the big criticisms that could rightfully be made of the Fed is that they have been more politicised than a central bank ought be and that as a result, the low cash rate has been more to help the government than to facilitate a good macroeconomic outcome.

It's hard to conceive of an argument in favour of such cheap debt this close to the GFC. Debt is effectively free, and so unless the US has undergone a radical, substantial and systemic overhaul of its risk appetite, risk management frameworks and controls frameworks (not to mention giving the SEC a shot in the arm) then I don't see how you're not just encouraging recklessness.

 

I don't know about recklessness, but I could really have fun this year if I maxed out every single one of my credit cards.

 

Roar.

And the bears are back today. Dow down over 300, now below levels last seen in spring of 2014. With more shutdown fights and a debt ceiling hike looming, I expect to be below 15,000 on the Dow by the end of the year.

Peace,

V-03

 

I agree with you and punk about liquidity issues. However, I think in some cases, markets with proactive and strong prudential regulation will be better placed to ride out liquidity constraints than places who've taken reform less seriously.