My grandkids like to play a game on my old computer. It requires them to bop gophers on the head when they pop out of their holes. If they succeed, they earn points but if they miss or, if the pop-up that they hit is dynamite instead of a gopher, they have to start over.
It seems to me that the US Federal Reserve is playing a real-life similar game in trying to manage the economy through its manipulation of interest rates. There are so many gophers popping up they don’t know which one to take aim at next. Let’s put names on the gophers: sub-prime mortgage, hedge funds, oil prices, financial derivatives, weak US dollar, out-sourcing of jobs, bond market vigilantes, stock market risk. Some of these gophers are suppressed by the September interest rate cut but others can become dynamite.
With so many gophers just waiting to pop up in front of Mr Bernanke, it should be interesting to see which one he swings at next !
Hey…
Interesting thought… the markets seem to be pricing in an agressive interest rate cut…but that move would futher destabilize the Us dollar. Looks like the fed is getteing sqeezed between a rock and a hard place…
I think the timing of cycle 2 (mid December) may lead it to be bigger than usual, as many fund managers will seek to lock in any gains before the year ends… then look for a strong cycle 3 rally as they reload their portfolios (look at all them bargains! lol ) in Jan.