Editore"s Note
Tilting at Windmills

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January 22, 2008
By: Kevin Drum

SURPRISE!....Hey, guess what? Late last night the Fed announced a "surprise" interest rate cut of 75 bp a week ahead of its regular meeting. And who had the inside scoop days ago? Advantage me!

UPDATE: Please note that past performance is no guarantee of future results etc. etc.

Kevin Drum 11:13 AM Permalink | Trackbacks | Comments (19)

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How did I miss that? Very impressive KD - and an outsider to boot. Wall St careers have been made on less.

Posted by: martin on January 22, 2008 at 11:21 AM | PERMALINK

Great! I think I'll take the family, and see how long it takes us max out our credit cards.

Posted by: Donald from Hawaii on January 22, 2008 at 11:25 AM | PERMALINK

Kevin we know the you are the shiznik...!

Posted by: Karl Rove on January 22, 2008 at 11:30 AM | PERMALINK

For what it's worth, the announcement was at 8:20am Eastern time. 5:20am your time, but I'm still not sure that's 'than late last night.' Doesn't detract from your prognosticating genius, of course.....

Posted by: John on January 22, 2008 at 11:34 AM | PERMALINK

Good job Kevin! They are trying to get ahead of the panic. There is a rumor that CitCorp has some foreign investment pullouts and might be filing Chapter 11. That's got people really spooked. Also, the insurers are now taking a beating. I think the Fed knows the markets are going to head down quite a bit, they just want it to happen in smaller bites so people don't flip out.

Posted by: Doc at the Radar Station on January 22, 2008 at 11:34 AM | PERMALINK

Oook more inflation.

Posted by: Ya Know.... on January 22, 2008 at 11:45 AM | PERMALINK

Y'ever see when Colbert correctly predicts something? He says, "I don't want to toot my own horn but..." CUE "STARS & STRIPES FOREVER" MASSIVE BALLOON DROP AND "I CALLED IT!!!" GRAPHICS PACKAGE.

I'm just sayin'.

Posted by: cazart on January 22, 2008 at 11:53 AM | PERMALINK

And you didn't go and EDIT that, eh, Kev? That's the previous page, right?

Not that I'm suspicious, but...

Posted by: POed Lib on January 22, 2008 at 12:00 PM | PERMALINK

It's a good thing the fed cares so much about those huge banks, and all their wealthy shareholders. Wouldn't want to let fears of inflation get in the way of bolstering share values. I mean, it would be terrible if a few of the companies that dealt in CDOs and SIVs actually went bust. That would be awful, and something intolerable.
On the other hand, raising the minimum wage would pose a DANGEROUS threat of inflation. See, that's dangerous, that type of inflation. Danger.

Posted by: Govt Skeptic on January 22, 2008 at 12:04 PM | PERMALINK

1. NPR said earlier that .75 all at once was the biggest cut since 1994. They also said that the Fed may cut another .5 at the regular meeting next week. 1.25 in less than two weeks would be huge as these things go wouldn't it?

2. I see the US markets are only down a couple hundred points right now. Given that the foreign markets are down 8-10% over two days, I think anything under 400 pts would be a huge relief. Much less than the crash predicted yesterday.

Posted by: ArkPanda on January 22, 2008 at 12:05 PM | PERMALINK

You sure called it, dude.

Posted by: bob on January 22, 2008 at 12:07 PM | PERMALINK

Heh, I've been predicting the collapse for months!
(blows on party razzer)

Sadly, the underlying economic situation can't be fixed by playing with interest rates (creating more imaginary liquidity).

This is shoveling sand against the tide. Over the short term it may slow the rout a bit, but in the long run will make things far worse. A 'real' fix is going to be very painful... and take a long time.

We have a triple witching hour...

Equity Market implosion
Massive Trade deficit
Massive Budget deficit

If one examines the charts, you can see the diversion point from having at least a marginally 'reality based' economy starts back with Reagan and his voodoo economics.

Posted by: Buford on January 22, 2008 at 12:09 PM | PERMALINK

Buford, when the dotcom bubble burst we also were running a budget surplus at the time under Clinton. Now we are in big red ink and heading into recession.

Posted by: Doc at the Radar Station on January 22, 2008 at 12:21 PM | PERMALINK

First of all, nice prediction. Well done!

Although I think Pat Buchanan said the same thing on McLaughlin Group on Friday (stopped clock, etc.). So, you know ...


More seriously, though, this is not a good thing.

It shows the Fed in a panic and, if they make further cuts (as they are predicted to do next week), inflation could easily take off. And given stagnant wages, rising energy and health costs, food costs that are on the rise ... Just. Not. Good.

Add in global markets that, like most of us, have ZERO faith in the Bush Admin's ability to not totally fuck this thing up and we could be looking at a worldwide mess of historic proportions.

Yeah, I know. Probably too much doom and gloom.

I just have a bad, bad, bad feeling about this.

Posted by: Mark D on January 22, 2008 at 12:25 PM | PERMALINK

If one examines the charts, you can see the diversion point from having at least a marginally 'reality based' economy starts back with Reagan and his voodoo economics.
Anytime one lets cynicism take control, it's easy to believe that the entire global economy is just one big set of overlapping consensual Ponzi schemes. Have faith, rooted in the fact that at the bottom, people produce stuff that other people want.
(That faith has been hard to maintain the last few weeks.)

Posted by: Bill Arnold on January 22, 2008 at 12:26 PM | PERMALINK

Can you send me your spread for the upcoming Giants-Patriots game? And maybe the numbers for the Lotto coming up too.

Posted by: Auster on January 22, 2008 at 1:22 PM | PERMALINK

Wow, I stated in that previous comment thread there was NO WAY the Fed would cut .75 points. Strike one for me!

Posted by: luci on January 22, 2008 at 4:28 PM | PERMALINK

While I am impressed with your prescient forecast, Kevin, there is something more important here than patting yourself on the back:

The utter fiscal mismanagement of the American government by the Bush Administration is what needs to be the prime focus of what has caused this economic collapse.

By borrowing recklessly to fund unwanted and unnecessary tax cuts for the already-wealthy and for corporations (that produced, at best, anemic economic growth and job creation) and to conduct a pointless invasion and endless occupation of a Muslim country that should have never occurred is what got us here.

I hope voters remember this horrible economic plight we are in in November and keep Republicans away from the reins of power for another 40 years!!!

Posted by: The Conservative Deflator on January 22, 2008 at 4:55 PM | PERMALINK

I have said it before and I will repeat it here:

I know stagflation.
I have lived through stagflation.
Stagflation sucks!

One other thing.

Never. Ever. Ever. EVER start a land war in Asia.

Posted by: Tripp on January 22, 2008 at 5:10 PM | PERMALINK



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