Michael Gracie 

Bloomberg relays the epiphany: “We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.” Holders of U.S. debt will eventually “get tired” [...]

The first brush: Almost a Quarter of U.S. Homeowners Are Underwater – stats were taken from a report by Zillow.com. Barry Ritholtz clears things up a bit – in reality, 33% of Homeowners w/Mortgages Are Underwater. Meanwhile, the luxury market is beginning to suffer like subprime did two years ago. But, UK homeowners are getting [...]

The FRB: The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures. They got the “reduction in inflationary pressures” part right, [...]

Inflation is a nasty bug: To reiterate, the last time Producer prices were this high, the Fed had rates up in the double digits — not at 2%… Here’s a chart of the prime lending rate (as published by the WSJ) during “modern economic times” (each color change represents a rate change – click for [...]

The open question is why? The consistent sound bite seems to be “the housing boom that began in 2001…as a result of subprime mortgages”. Even today, Paul Krugman gives cover to Fannie Mae and Freddie Mac while trying to pin the problem on sub-prime post-millenia. It’s hogwash. As the chart below shows, the boom really [...]

From The Big Picture comment section: When the bank for the British royal family (RBS) is “forecasting” continued credit market troubles … when the European Monetary Union is essentially declaring war on the Fed with threats to drive the exchange rate value of the dollar into the depths of hell … you must appreciate how [...]

Headlines are sometimes veiled in sarcasm. In the world according to this Bloomberg columnist, the Fed might start raising rates again really soon. Sure they will. In other news sure to make you feel warm and fuzzy, pharma company Bristol-Myers Squibb discloses they’re taking a hit from investments in sub-prime mortgages. And bond insurance big [...]

Negative real interest rates didn’t help Japan much either.

Sticking to hard data, this morning’s Fed Funds rate cut of 75 basis points was the deepest on record. Who’s record? The Feds own record, dating back to 1971. Note that there are several occasions where the Fed raised rates (either the discount or fed funds) by 3/4 of one percent: the summer of ’73, [...]

The Economist calls the latest move desperation. With only a week to go until the next meeting, a 75 bip cut might make an investor think the Fed knows plenty they don’t. UPDATE: It’s funny that oil for March delivery had punched 7-week lows when the Fed made the announcement – I’m not sure how [...]