Brendan Smialowski for The New York Times Ben S. Bernanke, chairman of the Federal Reserve, testified before the Senate Banking Committee in Washington on Tuesday 715/08.
- Senate Banking Committee: "Mr. Bernanke avoided the word “recession” in characterizing the current economy, noting instead that consumer spending and exports were keeping growth “at a sluggish pace” while the housing sector “continues to weaken.”"
- Labor Department reported: " that wholesale prices rose 1.8 percent in June, making for the fastest 12-month inflation rate in more than a quarter century."
- Actions to Stabilize Fannie and Freddie: occurred over the weekend as the Treasury secretary, also called for Congress to approve emergency legislation giving the federal government power to inject billions of federal funds through investments and loans.
- Henry M. Paulson Jr.: The actions announced Sunday echoed similar actions in mid-March, when the Fed moved to avert a financial collapse of the investment bank Bear Stearns by offering an emergency loan to facilitate its sale to J. P. Morgan Chase. At the same time, the Fed set up emergency lending facilities for major investment banks hit by the credit crunch.
- “These steps to address liquidity pressures: coupled with monetary easing seem to have been helpful in mitigating some market strains,” Mr. Bernanke said. But despite the “positive effects” of the Fed’s actions, he said that the problems of unstable markets continued because of “declining house prices, a softening labor market and rising prices of oil, food and some other commodities.”
Whose your Daddy and Mommy: The answer is the Federal Reserve & Treasury Department. The children are Large Financial & Banking Institutions. Meanwhile, today (7/15/08) in Encino, California police were called in to quiet and arrest if necessary, a crowd of over 200 people trying to get their money out of the new Indy Mac Bank. Early review of the records indicate that 1,000's of individual depositors will not be fully covered by the FDIC insurance. Kind of takes you back in time to, "It's a Wonderful Life" bank run.
No Relief on the Horizon: Rumors are now flying about other large Banking Institutions who were big lenders of Option Arm Mortgage loans as being in trouble. Sorry folks, as Wallstreet Walls crumble the large blocks fall on main street investors.
Rope a Dope: Yikes, June wholesale numbers up 1.8%. Listen to Professor Ben on this one. He is looking for a temporary spike in prices.
I believe before year end we will see major downward readjustments in commodity prices across the board. Why? Rising unemployment, Increasing Bankruptcies, continued international outsourcing pressure on goods and services, and no wage growth in the middle and lower class sectors. In addition, worldwide de-leveraging of capital market positions will lowers the velocity of money in circulation.
Another words deflation will start to appear - - something nobody wants to see.
Jim
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