Too Hot to Change?

The Cunning Realist takes a look at limits:

Since the bursting of the technology bubble in 2000, there have been four distinct periods in which the Fed has flooded the system with an extraordinary amount of liquidity in an effort to boost the stock market:

1. Immediately after 9/11.
2. During the second half of 2002 in response to widespread accounting scandals and the meltdown in the corporate bond market.
3. During the summer and fall of last year, just before the presidential election (draw your own conclusions).
4. The past two months.

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Inflection Point?

Earlier this month, when Edward wrote

The alarm shot was given by Dalls Federal Reserve President Robert McTeer when he declared in a speech in New York last week that whilst overseas investors now ?finance? the US current account gap, ?theoretically some day that process will come to an end, the flows will turn against us and there will be a crisis that will result in rapidly rising interest rates and a rapidly depreciating dollar.? This prospect, which currently seems remote, should not be taken lightly. It is real, and it is there.

I noted that this prospect had been around for a long time (close to ten years at least) and asked what would constitute a sign that this time might be different.
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