econ update

[kanzeon_2040]

Despite the recent scary stories about stalling or falling home prices, dozens of bankrupt mortgage lenders, and an unprecedented wave of upcoming home foreclosures, so far 2007 has been kind to stock and bond investors. Although we've seen a few sharply down days on world financial markets, as of last night all of Vanguard's mutual funds are in

Comments

the last section with all the layoffs

[rzrxtion]

doesn't herr chimpenführer and his peoples crow on and on about how the job market is exapanding and there's [insert whatever] new jobs created?

Re: the last section with all the layoffs

[kanzeon_2040]

Nobody panic.

[spiritquest]

Did he really say that we have entered an era of permanently inverted rates? Since the Fed practically sets the short term rates directly, wouldn't that basically be saying that he intends to keep those short term rates above long term rates?

[kanzeon_2040]

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said the prolonged inversion of the U.S. Treasury debt yield curve does not signal a slowing economy, but it could pressure profits at smaller banks.

"There's been a good bit of evidence that the declines in the term premium and perhaps a great deal of saving chasing a limited number of investment opportunities around the world have led to a somewhat permanent flattening or even inversion of the yield curve, and that pattern does not necessarily predict a slowing in the economy or recession," Bernanke said on Wednesday in testimony to the Senate Banking Committee.

He said he did not see the inversion as putting "tremendous pressure" on the banking sector, as many banks were able to use hedges and other financial instruments to deal with the problem of higher short-term deposit rates and lower long-term loan rates. Smaller banks may have more difficulty with this, he said.

[spiritquest]

So he didn't really say permanently, just prolonged. :-)

This is a total stab in the dark and my hunch is based mostly from a sense that there is form of cosmic fairness... but I think the 15% capital gains tax rate spurs a great deal of inflation threat. The only world where (a capital gains tax lower than income tax) makes sense is one in which there is high inflation. Put a low capital gains tax into the pot and inflation wants to rise in sympathy after a couple years (cosmic fairness :-) ). You can put a lid on the pot, but its still going to boil regardless of the lid.

I know I haven't illustrated cause and effect, its just a hunch.

[zaimoni]

Linear correctors always miss sharp turns.

In due course, they will force underreporting of job creation, just as they are forcing overreporting now.