See: Wrong-Way Greenspan Strikes Again by John Crudele [NY Post] See: Fannie Considers McDonough, Gramm and Shea as Chief by Robert Schmidt [Bloomberg] See: Report: Fannie Mae Shrinks Loan Portfolio by Associated Press See: Burning Bridges and Halfway Houses by Dr. Antal Fekete. See: Where is your money going? by Congressman Ron Paul See: The Fed's Track Record -- It Isn't Pretty by James Turk Ole Bear, Editor, Commentary Gazing into Murky Crystal Balls The seriousness of the problem cannot be overstated. A steep rise in interest rates at this juncture would be the horror of horrors. Normally higher interest rates would strengthen the value of the currency as they attracted foreign investors. Not this time. Apart from the problem of pricking all the bubbles in the economy starting with the housing bubble, and ballooning the budget deficit into outer space, there is an even larger and more immediate problem. And that is the effect that steeply rising interest rates have on the value of bonds, widely held at home and abroad. The effect is inevitable and instantaneous. Higher interest rates make bond values collapse. -- Burning Bridges and Halfway Houses -- Antal Fekete It looks like ex-NYFED Boss McDonough is a Top Cat contender for Franklin Delano Raines' old job at Fannie Mae. If Dr. Fekete is indeed correct about collapsing bond values with rising interest rates, perhaps McDonough is the best choice over ex-Politico Gramm and Shea, the insurance exec. He might even be able to put accounting footnotes in invisible ink for five years like the FED Boys and Girls are able to do with FOMC meetings for a five-year hiatus. That might keep the business of the American Dream alive at Fannie Mae and boost their stock price, perhaps. We suspect within five years, that the GSEs will be under direct supervision of the US Treasury and the FED Boys and Girls anyway, so this is perhaps the most logical choice. In the snippet from Congressman Paul linked above, where our politicos inside the Beltway are throwing all this money around defies reason and belief as I gaze into the crystal ball. I see a lot of pork fat burning and stinking up the place. This blatant fiscal irresponsibility defies prudence and reason. The snippet linked to James Turk has a very entertaining chart on the destruction of the paper money system. This is one of the reasons why real estate prices are inflating across the land. We just inspected a property that sold for $156,000 in September 1997. Updating the old appraisal at $159,000 at the time of the sale when new, a little over seven years later the property will probably bring from $210,000 to $220,000+ today [assuming about a 4-5%+- local appreciation rate], and the house is nearly 8 years old. This is obscene -- it is still the same nice house in 2005, that it was in 1997. [This is what I call 'measured pace' price inflation, Alan!] We were rolling on the floor splitting our sides reading the Crudele piece this morning linked above at the NYPost. The thought of Alan Greenspan driving 100 miles an hour down a one-way street the wrong way in Georgetown amongst all the 2-story row houses, throwing money out of a fire engine red 1964 Lincoln Continental 4-Door Convertible with the top down and on cruise control is even funnier than blind Colonel Frank Slade [Retired US Army] speeding through the back streets of NYC in a red Ferrari with the top down [Scent of a Woman]. The Continental has a bumper sticker [ehhh snicker] on the rear end -- Gold and Economic Freedom for All! Then all of a sudden, the crystal ball goes murky again. All I can see are white snowflakes inside the ball. Ooooops! -- upon closer scrutiny there is a fleet of jet helicopters flying in perfect formation.... Hey, those aren't snowflakes at all! It's tiny Dollar Bills! There is a bumper sticker on the lead helicopter: Inflate or Die! -- Bernanke Yours Truly,
Ole Bear, Editor © 2005 Realty Reality |
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