Tuesday, January 22, 2008

Fed Cuts: Effects Include...

As asked by The Big Picture:

The free lunch crowd (a/k/a Long & Wrong) has been chanting for Fed cuts. However, these are not with0out consequences, as Inflation remains a pernicious threat.

Here’s a question: What goes to $5 a gallon first – Milk or Gasoline?

As SOME people learned during the reign of Volcker, higher rates make the USD strong. Low rates do the opposite.

So hard commodities like copper, steel, petroleum, and gold are going to take off in price.

By the way, for those of you who don't know: the Fed's cut is in interest rates paid BY BANKS to the Fed to borrow money from the Fed--or to borrow money from other Banks (if they will lend it.)

It ain't for youse louts.

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