When Bernanke Speaks, Everyone Has To Listen
In September 11, Fed Chief Bernanke said that “the global savings glut” has helped keep interest rates low, followed by a 50 base point cut in September 18. This time, our Fed Chairman sees period of slow growth. He said in last Thursday that economic growth will slow noticeably in coming months while surging oil costs will raise inflation pressures. But he said the economy is nowhere close to the stagflation nightmare of the 1970s and he predicted an economic rebound by mid-2008. What’s the result? DOW was down 400 points for the week. The lesson? When Bernanke speaks, everyone has to listen!
To back up what Fed Chief has said, here is the article, “On Guard Against Recession”, talking about future GDP growth, from BusinessWeek:
In the fourth quarter, look for the full brunt of the credit crunch, the latest downturn in the housing slump, $90-a-barrel oil, and growing caution by consumers and businesses to take their tolls. Most economists expect growth of only 1% to 2% this quarter, with little improvement in early 2008, and many of those folks have their fingers crossed. The risks to that somber forecast are almost all to the downside.
In October, there was only $50 billion in mortgage resets. Though, a large portion belongs to sub-prime. See where we are now. When facing nearly $600 billion in mortgage resets for the next 6 months, market needs to correct big time. Does anyone remember where was the stock market when GDP was 1% and 2% several years back? What if a major financial firm, such as Citigroup, declares bankruptcy? There will be more blood shed down the road!
Here is an interesting conversation between Ran Paul and Ben Bernanke from YouTube.
