Editore"s Note
Tilting at Windmills

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September 20, 2007
By: Kevin Drum

WHAT DOES THE FED KNOW THAT THE REST OF US DON'T?....McClatchy suggests one reason why the Fed might have surprised everyone with a bigger rate cut than expected:

In a special report, Wachovia economists said Fed Chairman Ben Bernanke and five Fed governors met earlier this month with heads of the nation's major home builders and may have gotten a peek at sales and cancellation data.

"We believe those data showed a significant deterioration in home sales, which may be evident in next week's new and existing home sales reports," the report said, predicting a drop in new and existing home sales of 10 percent or more for August....Such a sour outlook might explain why the Fed surpassed most expectations that it would cut its benchmark interest rate by only a quarter point.

This is a good excuse to ask a question that always crosses my mind when the Fed does something "unexpected" — in this case cutting interest rates by half a percent instead of a quarter percent.

Obviously, a big rate cut has some substantive effects on the economy (and on equity prices in particular), which is why the stock market rallied and everyone was so happy. But there's a flip side, isn't there? If the Fed cuts rates more than expected, doesn't that also mean that the Fed is more worried than everyone thought it was? And isn't it possible, as in the case of the housing figures mentioned in the Wachovia report, that this is because they know some bad news the rest of us don't? Shouldn't that worry us?

Kevin Drum 3:26 PM Permalink | Trackbacks | Comments (73)

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(Posted this on wrong thread. Belongs here.)

I'm a really inept investor, so I typically don't. But I suddenly became aware of an investment I made 17 months ago that has earned me 19.66% return in actual cash value without any effort or risk on my part.

What is this lovely instrument? Well, it's a small stack of Euros I brought back from France in April, 2006 and forgot about. While sitting in my desk drawer, their value has increased from the $1.17 each I paid for them to $1.40 each this morning.

Of course, I'll have to unload them quickly, as the Fed is setting an inflation course that will quickly erode the real value of that increase.

Posted by: wileycat on September 20, 2007 at 3:33 PM | PERMALINK

don't worry, by the time you get the information all the big players will have already wrung all the profits out of it.

Posted by: supersaurus on September 20, 2007 at 3:34 PM | PERMALINK

Financial reporting on this has been pretty bad.

It is important to remember that this lowers the value of the dollar, making us all poorer. All so some schlubs on Wall Street can sell high before the market goes down.

Posted by: tomboy on September 20, 2007 at 3:35 PM | PERMALINK

If the Fed cuts rates more than expected, doesn't that also mean that the Fed is more worried than everyone thought it was? ... because they know some bad news the rest of us don't? Shouldn't that worry us?

—Kevin Drum

Yes.

Posted by: Econobuzz on September 20, 2007 at 3:36 PM | PERMALINK

Shouldn't that worry us?

Robert Reich was commenting this morning on how the Fed and the rest of the government continually bail out the big boys but not the small investors. So we should always be worried.

Also given the way the government and the press deified Greenspan and now we see him trying to weasel out of his support of the Bush tax cuts, yes, we should be worried. We should always be worried.

Posted by: tomeck on September 20, 2007 at 3:37 PM | PERMALINK

If the Fed cuts rates more than expected, doesn't that also mean that the Fed is more worried than everyone thought it was?

Not really. It might mean they thought the interest rates were too high to begin with because they overreacted the previous month in their fear of inflation. So now they're cutting rates at a greater rate to send a signal to the market we have no need to fear inflation and the economy is fine because of that.

Posted by: Al on September 20, 2007 at 3:41 PM | PERMALINK

Wall Street functions in certain ways like the political press functions: it loves certain narratives and ignores others.

so a narrative that it has loved a for a few years now (and why shouldn't it? wall street made a ton of money!) is that "interest rate cuts are good."

and they will continue to be good...until they aren't. unlike politicians, investors ultimately do care about the facts....

Posted by: howard on September 20, 2007 at 3:42 PM | PERMALINK

inverted yield curve.

The Fed wanted to short circuit an election year recession by stoking inflation.

HTH.


Posted by: Jeffrey Davis on September 20, 2007 at 3:43 PM | PERMALINK

I'm rushing my Euros down to the the money-changer's office as we speak!

Considering my track record as an investor, this action on my part will cause the Euro to soar in value and inflation to stop dead in its tracks!

You're welcome :-)

Posted by: wileycat on September 20, 2007 at 3:45 PM | PERMALINK

Hide the x-rays, they might reveal I have something fatal!!

Posted by: steve duncan on September 20, 2007 at 3:46 PM | PERMALINK

What should worry us even more is that it took the Fed so long to figure out the disaster that was looming in the housing market, and, more importantly, in the credit market and the spreading of unpriced, unregulated, and largely ignored risk. The risks are not confined to subprime mortgages or to mortgages in general. They have been spread throughout the financial system. Think leveraged buyouts, for example.

Oh, and there is the likelihood that the rate cut will not and cannot address these underlying problems. The roller coaster ride has only just begun.

Posted by: ammonite on September 20, 2007 at 3:47 PM | PERMALINK

Yes.

But also the harm -- current and prospective -- that it does to the dollar makes foreigners less willing to have their money in our debt instruments, and that makes the rate cut to not be fully reflected in mortgage rates. Which might make the move counterproductive.

Posted by: Wagster on September 20, 2007 at 3:52 PM | PERMALINK

Al, I could not have said it better. Time for another Hummer in the three car garage. In Apollo and Bush we trust.

Posted by: Drexel Hill Delphian on September 20, 2007 at 3:53 PM | PERMALINK

Even worse is the international flight from the dollar. If China and Saudi de-peg from the dollar, the real value of the dollar will drop significantly. A loss in the value of the dollar is a form of inflation (or its definition) but in our global economy, the fed's decision to CUT interest rates can actually CAUSE a drop in the value of the dollar as international capital seeks better returns elsewhere.

So the fed's cure for recession may actually cause inflation.

stagflation?

Posted by: yep on September 20, 2007 at 3:54 PM | PERMALINK

"Of course, I'll have to unload them quickly, as the Fed is setting an inflation course that will quickly erode the real value of that increase."

If the US experiences higher inflation than the rest of the world (all else being equal) your euro's would continue to appreciate against the dollar, so their value in dollars would continue to go up.

Posted by: jefff on September 20, 2007 at 3:54 PM | PERMALINK

Sorry, but the smart money was on a half point cut from the start after the Fed failed to cut a quarter point a couple of weeks in advance of the meeting. Look for another quarter point cut twice before year end for a total of a one point drop. Bernanke operates a more democratic Fed than Greenspan, and the meeting on home data may have been to bring recalcitrant ultra-conservatives, like the St. Louis Fed Chairman, into the fold.

Posted by: Jammer on September 20, 2007 at 3:55 PM | PERMALINK

and the resets haven't even begun to reset:

http://calculatedrisk.blogspot.com/2007/08/arm-reset-charts.html

Posted by: linda on September 20, 2007 at 3:55 PM | PERMALINK

Anyone paying attention to the housing market knows it has a long way to go before prices/supply stablizes. This rate cut will have no, I repeat no, effect on that. It helped (temporarily) those in the stock market. It helped (again temporarily) bail out Bernanke's banking buddies by providing more short term liquidity. It helped those short the dollar and long gold.

But did it do anything to address cash strapped consumers in way over their heads in houses they cannot afford? The answer to that is no.

Posted by: Easy Ali G on September 20, 2007 at 3:56 PM | PERMALINK

And for those worried about a dollar value drop, just remember that helps all of our companies doing business overseas. Lower value dollar=more exports.

Posted by: Jammer on September 20, 2007 at 3:56 PM | PERMALINK

Interest rates can't go below zero. This means that cutting interest rates is a medicine of limited supply. By cutting interest rates faster, the Fed is exhausting its medicine cabinet faster.

Posted by: Joel Rubinstein on September 20, 2007 at 3:56 PM | PERMALINK

I'm headed to Europe in a couple of weeks (Germany and Austria).

Thanks to the Fed's move, the Euro climbed to $1.40.
In mid-2002 the Euro was just over 90 cents.

Fortunately, my company's paying the more expensive items, but I'm going to be drinking some pricy beer.

Posted by: Joe Buck on September 20, 2007 at 3:58 PM | PERMALINK

I posted a comment that included hyperlinks. It was held and not posted. This comment tests the hypothesis that comments containing links are held and not posted immediately.

Posted by: Joel Rubinstein on September 20, 2007 at 4:00 PM | PERMALINK

I hear that China now holds so much of our debt that they CAN'T cash out without hurting themselves as much as us.

Good thing? Very bad thing? Pass the ketchup.

Posted by: wishIwuz2 on September 20, 2007 at 4:00 PM | PERMALINK

The great danger that they overlooked was the imminent collapse of the dollar. Anyone want to pay euros, currently $1.40, for oil? That is a 40% surcharge. Thank you, George; thank you George's boyz.

Fears of dollar collapse as Saudis take fright
By Ambrose Evans-Pritchard, International Business Editor Last Updated: 8:39am BST 20/09/2007
Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
China threatens 'nuclear option' of dollar sales
Fears of dollar collapse as Saudis take fright
Ben Bernanke has placed the dollar in a dangerous situation, say analysts....

[article worth a read]

Posted by: Mike on September 20, 2007 at 4:03 PM | PERMALINK

The BBC predicted it, so maybe the American consensus was just unjustified optimism.

Posted by: Boronx on September 20, 2007 at 4:08 PM | PERMALINK

I don't know anything about this but - folks - in case you haven't heard, the dear old senate voted to condemn MoveOn.org for its "Betray Us" ad.

Tell the Senate where to get off by donating to Moveon. Also, contact your senator and tell him where he gets off.

While I am one of the 3 million MoveOn members, I am just a guy making a statement. I am not a MoveOn employee or officer or anything like that.

Posted by: macmurphy on September 20, 2007 at 4:11 PM | PERMALINK

Kevin, this mainly shows that despite the Street's claim for the rationality of the "invisible" hand, investors are just as crowd-based emotionally-driven in financial decisions as other people in other walks of life.

Posted by: SocraticGadfly on September 20, 2007 at 4:20 PM | PERMALINK

"Anyone want to pay euros, currently $1.40, for oil? That is a 40% surcharge"

Not quite. If they switch to the dollar, the price of gas will not change much because of the switch (one of the reasons for current high oil prices is bc of weak US dollar). But if they switch to charging Euros for oil instead of dollars, the amount of dollars held abroad will decrease, thereby dropping the value of the dollar (and increasing inflation) further.

Fun times, fun times.

Posted by: yep on September 20, 2007 at 4:23 PM | PERMALINK

And for those worried about a dollar value drop, just remember that helps all of our companies doing business overseas. Lower value dollar=more exports.

But since almost everything we consume originates overseas, lower value dollar=more inflation.

Posted by: Vicente Fox on September 20, 2007 at 4:31 PM | PERMALINK

Nice Ambrose article Mike.

Posted by: Trypticon on September 20, 2007 at 4:32 PM | PERMALINK

Capitalism is a worrisome system almost by definition. That is exactly why intellectuals like Karl Marx decided long ago that planning by very bright men could produce a more rational system. Government bureaucrats would accumulate statistics and produce great charts and graphs and based on their findings project what moves would be in the best interest of "the people." Only one problem- after more than a century of operation including millions of dead human beings who did not fit in, socialism/communism proved that it does not work. But we still have progressivism to save us. Churchill said about democracy that it is the worst systen of government except for all the others. He could as accurately have said the same about capitalism.

Posted by: mhr on September 20, 2007 at 4:33 PM | PERMALINK

Some of us know there is bad news out there, but unlike state bankers, we are unable to manipulate markets to enrich ourselves and our friends. Most Americans can do little to stop the economic meltdown coming, except to shed debt. Most people will not be able to insulate themselves from the coming inflation, even if they know it is coming.

Nothing, not even a return to low mortgage rates, will help the home builders. It has always been the banks the Fed was assigned to protect, but I have read that even the Fed will not be able to save them from the subprime infestation.

Posted by: Brojo on September 20, 2007 at 4:39 PM | PERMALINK

The real question that needs to be asked is why the hell is the Fed pumping more air into the housing bubble? Prices need to drop another 20%, and they will. They question is whether it will happen naturally or in a panic. In any case, the building industry has overcapacity, and that extra capacity needs to be encouraged to move into other sectors by natural market forces, not bribed to stay around building more unneeded housing by a Fed Chair who, like the last Fed Chair, probably hasn't bothered putting his own assets into a blind trust.

Posted by: Disputo on September 20, 2007 at 4:43 PM | PERMALINK

"But there's a flip side, isn't there? If the Fed cuts rates more than expected, doesn't that also mean that the Fed is more worried than everyone thought it was? And isn't it possible, as in the case of the housing figures mentioned in the Wachovia report, that this is because they know some bad news the rest of us don't? Shouldn't that worry us?"

Hmm, honey, I think it's time we xfer everthing over to bonds, now!

Posted by: sheerahkahn on September 20, 2007 at 4:45 PM | PERMALINK

We know exactly what scared the living shit out of the Fed. That is the spreading mortgage crisis (it's already hitting jumbo, prime loans) and the looming bankruptcy crisis. That goddamned bankruptcy bill will going to wipe out a large portion of the middle class.

Take a look at Bear Stearns today. 67% (!!!) drop in profits. Just another symptom of how far and wide this goes.

Did you read their statement leaving the option of lowering interest rates AGAIN after an outrageous 50bp drop? The Fed is completely out of ideas. Their only solution is to dump a bunch of cash into the market and hope to inflate the nation out of having shitty economic fundamentals, which is an impossibility. It's Greenspan syndrome.

Posted by: Old Hat on September 20, 2007 at 4:58 PM | PERMALINK

Most Americans can do little to stop the economic meltdown coming, except to shed debt.

If you really think inflation is coming, you should leverage up as much as you can. Repayment will be in cheaper $s.

Posted by: TJM on September 20, 2007 at 5:01 PM | PERMALINK

It's all about the Benjamin...

Posted by: dalloway on September 20, 2007 at 5:03 PM | PERMALINK

Bank runs need to start before W. Bush leaves office.

Posted by: Brojo on September 20, 2007 at 5:03 PM | PERMALINK

Hmm, honey, I think it's time we xfer everthing over to bonds, now!

Why The Fed is slashing rates.

You're fucked if you keep it in equities, you're fucked if you think bonds are the way to go.

Mark my words: This is going to get real ugly.

The Chinese instituted price freezes they're so terrified of inflation. It's over 6% now

What's going to happen when the Chinese cash in those hundreds of billions of dollars worth of T-bills? What's going to happen to gas prices if the markets stop trading crude in dollars and switch to pounds or euros?

There's such a long list of serious, profound economic problems right now, I don't really know where to start.

I've always been bearish but this is a different animal. Thankfully I saw this shit coming a year ago so have a bunch of solid investments but I'm legitimately worried about the rest of the country that doesn't have the benefit of access to good newspapers and skeptical blogs like this one.

Posted by: Old Hat on September 20, 2007 at 5:04 PM | PERMALINK

Some of us know there is bad news out there, but unlike state bankers, we are unable to manipulate markets to enrich ourselves and our friends.

Nonsense, this is a myth institutional investors sell to people to scare them off and so they can hog the profits for themselves. In fact, you can make a killing on those hedge fund assholes right now.

The average investor, if he or she is patient and plays the cards right, stands to make a ridiculous amount of money over the course of this economic downturn. Personally, I'm excited. It's a buyer's market.

Posted by: Old Hat on September 20, 2007 at 5:07 PM | PERMALINK

Bank runs need to start before W. Bush leaves office.

Bank runs are already starting in the UK. Check the Northern Rock story and the other small to mid-market banks over there. And that's a conservative banking sector (although they have shitty, pre-New Deal era banking regulations).

Good for us bears, though.

Posted by: Old Hat on September 20, 2007 at 5:11 PM | PERMALINK

Will any of this help me in my home loan.Will i be able to refinance and save some money.?

Posted by: john john on September 20, 2007 at 5:17 PM | PERMALINK

Brojo,

But isn't it true that inflation helps debt-holders, because the value of their debt goes down? Assuming one doesn't lose one's job won't inflation help the average debt ower and hurt the banks?

Posted by: Tripp on September 20, 2007 at 5:19 PM | PERMALINK

But isn't it true that inflation helps debt-holders, because the value of their debt goes down? Assuming one doesn't lose one's job won't inflation help the average debt ower and hurt the banks?

Yes! :D

Nothing as satisfying as watching these greedy banks and those horrible predatory credit companies get hoisted on their own petard.

Consolidate to a manageable monthly minimum through a credit union if possible. You can come out waaaay ahead when this passes.

Man, lots of action in the commodities market. 'Specially grain and oil...

Posted by: Old Hat on September 20, 2007 at 5:28 PM | PERMALINK

I have a very good fundamental understanding of accounting and finance. Companies that I was Corporate Controller and V.P. Finance of did very well and we had a good understanding of our business.

This rate cut by Bernanke is absolutely nuts. ( MBA term )

I actually don't seem to be able to express how nuts I actually think this is. Could it be a psychological mind set that Americans don't have to experience any pain or even discomfort? We as a nation, have we become hysterical, is Cramer a computer generated copy of the American mind?

The idea that America will continue to reduce interest rates instead of reducing our debts will drive every foreigner out of dollar denominated assets. I think we are seeing a total breaking of faith that holds the world's financial system in place.

Having a good accounting and finance back ground is an incredible handicap in understanding what these people are up to.

What the hell is going on?

Posted by: Geraldo on September 20, 2007 at 5:30 PM | PERMALINK

I suggest you look at the performance of the homebuilders stocks before you assume the fed knows something the markets do not know.

Posted by: spencer on September 20, 2007 at 5:32 PM | PERMALINK

"Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml

Posted by: Helicopter Ben on September 20, 2007 at 5:33 PM | PERMALINK

I think Kevin's point is a good one, but I would be a whole more concerned that Dumbya described the economic fundamentals as sound and said Bernanke was doing a heckuva job today. Because Dumbya does not know what the truth is we can assume the fundamentals suck and that Bernanke is incompetent. Inflation will hurt the idle rich and retirees who have saved for their golden years the most and will help those people who have irresponsibly spent beyond their means the most including ultimately the government which is the world's biggest deadbeat.

Posted by: Terry on September 20, 2007 at 5:33 PM | PERMALINK

What the hell is going on?

These guys are so clueless and stupid they cut the overnight rate. Just in case everyone didn't get it. It's like amateur hour.

Way to telegraph your palpable sense of panic, fools.

LMAO, I love making money on stupid Republicans.

Goodbye greenbacks!

Posted by: Old Hat on September 20, 2007 at 5:37 PM | PERMALINK

They can cut the rate all they want but you can't sell homes to people who don't have money. The country is in a recession. My friends who work in bars and restaraunts say they have no customers and they go home early. My friends who work in real estate say the market has tanked. When Wal-Mart states its customers are out of cash, believe it. The election is going to be determined by the economy not the war. People can't take it anymore.

Posted by: aline on September 20, 2007 at 5:37 PM | PERMALINK

Then again, the Fed presumably also received advanced word of Wednesday's benign consumer inflation report.

Posted by: Measure for Measure on September 20, 2007 at 5:38 PM | PERMALINK

Government bureaucrats would accumulate statistics and produce great charts and graphs and based on their findings project what moves would be in the best interest of "the people."

But instead we get government bureaucrats accumulating statistics and producing great charts and graphs and based on their findings enact what moves would be in the best interest of "the bankers."

Posted by: Jenna's Bush on September 20, 2007 at 5:39 PM | PERMALINK

Tripp, not if you have an ARM. ARM's were sold as a way to help low income people purchase mortgages, but they were really allowed to flourish to help banks avoid the inflation penalty. Also, a significant part of the population have no debt, they cannot afford it. These wage earners will see the costs of food, rents and utilities rise much faster than their wages. It is very bad news for discount retailers.

Posted by: Brojo on September 20, 2007 at 5:39 PM | PERMALINK

John John,
If you have a conforming mortgage, probably not. More liquidity *might* mean that the cost in points of an affordable jumbo rate comes down. The rate cut has a direct effect on home equity lines of credit, and if you have one of them right now variable tied to prime it should drop automatically. The Fed did this to keep the equities market from completely tanking but also to provide some relief to banks that have been so spooked by the mortgage collapse that they are reluctant to lend each other money which makes lending to consumers more difficult. As a lender for a big national bank I have mixed feelings about this. The rate cut makes my life easier this month but I don't really see it as having favorable effects on mortgage interest rates long term. I'm afraid inflationary pressures will continue to drive rates up. Bleah.

Posted by: Sean on September 20, 2007 at 5:42 PM | PERMALINK

I'm not convinced that financial Armageddon is just around the corner, however to the current leaders of this nation it is completely acceptable for everything to collapse into a heap of smoking rubble provided that it does so after Jan 20, 2009 (Nov 5, 2008 in a pinch).

Posted by: jefff on September 20, 2007 at 5:43 PM | PERMALINK

I can understand if the FED got some unexpected bad news but I wonder if they are actively trying "not" to find out the bad news until the big boys have to fess up. There have been bad indications all year on the housing mess.

Posted by: CarlP on September 20, 2007 at 5:50 PM | PERMALINK

What a diabolical witches brew has been concocted in this country. Terrible loan practices, no regulation of any private sector, a very costly war, corporate greed, mega tax breaks to the wealthy, a dumb populace informed by a corporate-driven press...when's the war with Iran, I need to take my mind off this stuff.

Posted by: My head hurts on September 20, 2007 at 6:07 PM | PERMALINK
I think Kevin's point is a good one, but I would be a whole more concerned that Dumbya described the economic fundamentals as sound and said Bernanke was doing a heckuva job today. Because Dumbya does not know what the truth is we can assume the fundamentals suck and that Bernanke is incompetent.

That doesn't logically follow. If W. doesn't know what he is talking about, the truth of the fundamentals or Bernanke's performance cannot be inferred, even negatively, from Bush's claims.

Posted by: cmdicely on September 20, 2007 at 6:45 PM | PERMALINK

Having a good accounting and finance back ground is an incredible handicap in understanding what these people are up to.

Posted by: Geraldo

Since "these people" all have a good accounting and finance background, maybe that's why they don't know what they're up to!

Posted by: Econobuzz on September 20, 2007 at 6:53 PM | PERMALINK

Very few people practice sound financial skills. The Politicians, Bureaucrats, Federal Resource Board, Bankers, Loan Officers and Consumers are ALL responsible for the fiscal mess this country is currently experiencing. Don’t expect any miracles, just another bailout until the whole house/country comes down.

Posted by: Allan Baur - free credit report on September 20, 2007 at 6:58 PM | PERMALINK

Economics is not an exact art. As far as predicting the future it is gamble, guess, and opinion.

Posted by: Luther on September 20, 2007 at 7:10 PM | PERMALINK

Economics is not an exact art. As far as predicting the future it is gamble, guess, and opinion.

But of course it is.

Posted by: Warren Buffet on September 20, 2007 at 7:21 PM | PERMALINK


Buy mor euros!

Posted by: wileycat on September 20, 2007 at 7:28 PM | PERMALINK

If the Fed cuts rates more than expected, doesn't that also mean that the Fed is more worried than everyone thought it was? - Kevin
---

Here are three possibilities:
1) Things ARE actually much worse and the markets actually NEED the lower rates-in an objective sense-not factoring any politics. In the past two recessions the federal reserve tended to hold the rates steady and not cut them until it was OBVIOUS we were already in or entering a recession.

2) The Fed may not see the economy as currently in or entering a recession *at this time*, but it is looming and they are doing a *pre-emptive* cut-which would be something new I think. Kind of like getting on the propane burners before the balloon gets in to the power lines a little sooner rather than later.

3) Perhaps they are playing "chicken" with China's currency peg. Who will blink first? They are playing with fire IMO, we could both end up shooting each other in the face over this.

Posted by: Doc at the Radar Station on September 20, 2007 at 7:29 PM | PERMALINK

Oh yeah, and what Jeff said at 5:43PM
4) I'm not convinced that financial Armageddon is just around the corner, however to the current leaders of this nation it is completely acceptable for everything to collapse into a heap of smoking rubble provided that it does so after Jan 20, 2009 (Nov 5, 2008 in a pinch).

Posted by: Doc at the Radar Station on September 20, 2007 at 7:31 PM | PERMALINK

They are playing with fire IMO, we could both end up shooting each other in the face over this.

Who's that laughing in the back of the class?

Posted by: Dick Cheney on September 20, 2007 at 7:31 PM | PERMALINK

HOLYFUCKINGSHIT

Sen. Ted Stevens (R-Goner) taped by the FBI in a sting operation?!?

http://talkingpointsmemo.com/archives/053791.php

Posted by: LOL on September 20, 2007 at 7:34 PM | PERMALINK

Kevin does this answer your question?

http://news.bbc.co.uk/2/hi/business/7004923.stm

Losses from sub-prime mortgages have far exceeded "even the most pessimistic estimates", US Federal Reserve chairman Ben Bernanke has said.

His comments to a US finance committee come two days after the Fed cut base interest rates to 4.75% from 5.25%.

Posted by: LOL on September 20, 2007 at 7:35 PM | PERMALINK

That doesn't logically follow. If W. doesn't know what he is talking about, the truth of the fundamentals or Bernanke's performance cannot be inferred, even negatively, from Bush's claims.

Ah, but you are assuming the problem is W-not-knowing-what-he-is-talking about. That needn't be the characteristic of W. If he is just a classic loser, now, then all you have to do is the opposite of what he does, for his decisions are loser decisions. It is a legit trading strategy: find the perfect loser and then do the opposite.

It is God's purpose for W. He will have informed us all of loser decisions in fiscal policy, international relations, etc. It will help even the Republicans appreciate the intelligence of the Democratic President.

Posted by: Bob M on September 20, 2007 at 8:15 PM | PERMALINK

A MESSAGE FROM THE PRESIDENT OF THE UNITED STATES

Good evening. In the life of all imperialistic military empires, there come brief, fleeting moments that decide the direction of a multinational corporation masquerading as a democratic nation, and reveal the character of its blue-blooded aristocrats, conniving religious hucksters and corrupt, back-slapping robber barons. We have now been suspended in such a moment for over six calendar years.

We are tasked, those of us who vote, are intimidated into not voting, vote more than once at a time, or more importantly, have substantial stock holdings, to chose between triumphant, noble victory in Iraq or disastrous, humiliating defeat. Luckily, everything in life is just so black and white. Either you're for a peaceful Middle Eastern paradise fantasy conceived in an absurd bubble of historical revisionism and ignorance of human nature, or you're personally responsible for the bloody murder of all them Iraqazoids that will happen if Uncle Sam cuts and runs. And many will die, much the way hundreds of thousands of them have been dying since their liberation in 2003 from a dictator's deadly chokehold and into the deadly chokehold of a sham, democratically-elected, Shia-mob ruled government.

In light of recent testimony from untouchable warrior-bookworm General Petrolus, the surge is working, and it will continue to work. Peace is breaking out all over, especially in remote, uninhabitable swaths of useless Iraqi desert, thanks in large part to the military troop surge I done wink and nodded into existence eight months ago. The surge has done everything I hoped it would do, which was buy political time so I can pass the buck to whatever poor son of a bitch – or straight up bitch – occupies the Oval Office come 2008.

If you're a true patriot, one of the faithful who love America, then take pride in knowing that your President believes all of the cynical, ridiculous falsehoods he reads you off the teleprompter. If you're a Democrat, or thinking about voting Democrat in the upcoming elections, or a Republican without the balls to drown your conscience in a pint glass of single malt, then ask yourself: are you for the terrorists or against the soldiers?

Eight months ago, we adopted a new strategy to meet that objective, including a surge in U.S. forces that reached full strength in June. This week, General David Petrolus and Ambassador Ryan Crockershit testified before Congress about how that strategy is progressing. In their testimony, these men made clear that no bureaucrat in the history of bureaucracy has ever claimed that his or her bureaucracy is anything less than the most important and efficient department in the history of human society.

The premise of our strategy is that securing the Iraqazoid population is the foundation for all other progress – even if that foundation is built with the putrefying corpses of innocent civilians. For Iraqistazis to bridge sectarian divides, they need to feel safe in their homes and neighborhoods. They also need mass outpatient lobotomies and heavy duty Thorazine prescriptions to erase any memory of all those centuries of religious and tribal hatred.

For lasting reconciliation to take root, Iraqis must die. Lots of them. Only once we've killed the vast majority of them, and finally made that fake country invented by the Europeans scream "UNCLE," can we begin the slow process of remaking that entire region and passing out Outback Steakhouse franchises in Anbar Province.

Since the surge was announced in January, it has moved through several phases. First was the talking phase, where all I did was talk about surging, and how kick-ass surging would end up being. Then there was the phase where the Pentagon emotionally blackmailed soldiers into happily redeploying to Iraq in order to watch their comrades’ backs, as opposed to the corporate mercenaries of Blackwater who return to Iraq to watch their bank accounts surge. And finally there's the phase where we talk again, a little from me, and a lot from President-Elect-Of-The Future General Petrolus.

Anbar province is a good example of how our strategy is working. Last year, an intelligence report concluded that Anbar had been lost to al Qaeda. But we're slowly turning that hellhole into my adopted home state of Texas: we're arming everyone. Whipping out the Federal AmEx and passing out guns to whoever will play like they love Uncle Sam – and then letting God play referee as the bullets and shrapnel whizz.

Let me stress: I believe we should stay the surge. I believe that our mission gets even more accomplisheder every day. I believe that the war in Iraq will end the way it began – awesomely.
To the Iraqi people: You have voted for freedom, and while the freedom you voted for was freedom to partition your country along sectarian lines, we're going to focus on the whole "freedom" part, and just be happy that you're even getting that.

To Iraq's neighbors who seek peace: You need our money. You need our guns. So fucking shut the fuck up and do what we tell you. Also: the efforts by Iran and Syria to undermine that government must end, very soon, or we'll be giving you 48 hours to end said efforts.

To our military personnel, intelligence officers, diplomats, and civilians on the front lines in Iraq: You have done everything America has asked of you. Now just do some more please.

Some say the carefully selected statistical gains we are making in Iraq come too late. They are mistaken. It is never too late to deal a blow to al Qaeda. For instance: if I really, really wanted to, I could allocate proper military resources towards capturing or killing Barack Osama Hussein-Laden. It is never too late to advance freedom, and more importantly, the geopolitical goals of the multi-national corporations who I represent. And it is never too late to support our troops in a fight they can win. Although, for the record, it is too late for me to go back in time, accept the draft, serve my country with the working class I claim to speak for, and experience the bloody combat into which I blithely send other people's children to die.

Good night, and God bless America.

Posted by: George W. Bush on September 20, 2007 at 8:25 PM | PERMALINK

If you really think inflation is coming, you should leverage up as much as you can. Repayment will be in cheaper $s.

That's probably good advice. What if there is stagflation?

Posted by: Brojo on September 20, 2007 at 11:40 PM | PERMALINK

I hear that China now holds so much of our debt that they CAN'T cash out without hurting themselves as much as us.

The old saw: if you owe the bank $100 and you can't pay, you're in trouble; if you owe the bank $100,000,000 and can't pay, the bank is.

Posted by: Jeffrey Davis on September 21, 2007 at 9:02 AM | PERMALINK

If you really think inflation is coming, you should leverage up as much as you can. Repayment will be in cheaper $s.
Posted by: TJM on September 20, 2007 at 5:01 PM | PERMALINK

I think that's what most of America has been doing. Right?

Anyway, I warned all you fuckers that this was going to happen back in 2000 when you voted for that dumb oil-stinkin motherfucker Saudi stooge Bush. I *TOLD* you he would get us into a war in the middle east, drive up the price of oil, and borrow-n-spend the economy into a depression, just like his father tried to do.

Why didn't you stupid fucking idiots listen to me?

Posted by: osama_been_forgotten on September 21, 2007 at 7:14 PM | PERMALINK




 

 

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