Thursday, May 2, 2013


Well, seems I can, actually.  The ECB cut its short term rate by 25 basis points putting it in line with everybody else in the world who resembles a central bank.  Had they not there would have been an uproar beyond all belief as the cut had been priced into markets for weeks.  Following right along, the Fed announced that QE III would be continuing for some time and might actually increase--unless it decreased because of a deep drop in unemployment numbers which of course was not expected to occur.  Dragi also mentioned that the ECB was considering negative interest rates at some point, a strategy that some time last year was suggested as one that the Fed might adopt but didn't.

In listening to all of this, particularly the bumpf from the Fed it occurred to me that their was a danger in pegging future actions to the unemployment rate.  There has been a slow and somewhat steady drop in the rate over the past year but that is because so many people have simply thrown in the towel and dropped out of the labor force entirely.  Is the Fed gambling the future on a highly subjective and greatly influenced rate the movement of which may bear no message as to the true state of the economy?  What if things deteriorate to the point where the 6.5% is reached but nobody's working and all the other economic numbers stink?  Sounds funny to say but has the Fed created a situation where in the future they may find themselves in a box of their own making?  Just wondering.

Anyway, stock markets loved it and shot forward prompting one talking head to speculate, "I'm beginning to wonder if this is not a rally driven purely by liquidity?"  I mean, where do we get such men (and women)?

Over there, Italy reaffirmed that it would stick to the austerity path outlined by the EU but not to many of the steps to which they had agreed to make it happen.  How's that again?  Oh well, I guess if anybody can pull it off it's the Italians.  Meanwhile, Over Here, the monthly job report is out tomorrow at 8:30 am sharp...and The Leader is in Mexico where it is probably a good place to be as the economy is doing very well and unemployment has been greatly reduced to the point that illegal immigration to the U.S. has practically stopped.  Wonder how he will try to take credit for that?  It should make for an interesting day.

No comments:

Post a Comment