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'Nanke said we still need help for the economy. I didn't want to hear that. The house of cards keeps getting bigger. It's gonna' fall someday and then what?
This 'correction' was needed. The market has been rising all year long and it needed to take a break. Good time to take profits. Tomorrow will be interesting. Will the sell-off continue or will the market bounce back?? Stay tuned.
The longer term rates are something the fed can not control directly or perhaps at all,
The global bond market is 100 trillion dollars. The fed buys 85 billion a month in securities. The us market is 1 trillion a month in trading.
The feds action will not influence much if the worlds investors decide rates should stay low.
By the same token If the worlds investors feel rates should be higher and decide to sell 100 trillion in bonds there is nothing the fed can do to keep rates down either .
We already saw the famous inverted yield curve right before the recession when the worlds investors disagreed with the feds actions of trying to raise rates.
End result was long term rates were lower than short term rates.
I don't know if the Fed is really concerned with low rates per se. I think they ultimately want to increase the velocity of money and right now the ultra low rates for so many asset classes are a primary symptom of the lack of velocity as too much bank capital stops moving once it gets parked in Treasuries and other bonds. Beyond just the banks there is just too massive a pool of money which is simply yield hunting and not putting capital into higher productive usage. This has to be what the Fed is really thinking is the puzzle to be solved, but they couch it in carefully crafted statements like unemployment is too high or the economy is not showing enough strength to get into exit velocity.
Ultimately what is likely to get the world economy going again is coordinated stimulus. When you have Japan spending and Europe cutting back and the US slowly reigning in deficits too, the message is very conflicted and its hurting the world's biggest drivers which are the emerging market economies.
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