I’m frustrated with the lack of response to posts like this. A thread about listings are worthless to a realtor gets 74 responses, the 50 year mortgage gets 20, and this gets 2. Opinions are welcome too, but I’m really looking for an understanding of what drives the Fed, on what basis they make their decisions. It sounds like no one really knows.

I disagree about your assessment re. gas and spending. Spending is way down. I’ve talked to people who have spoken w/ manager at Poway Starbucks and Poway’s Home Depot employees. Both report business is way down lately, and attribute it to rising gas prices. The trade deficit was narrowed the last 2 months, and if it is the beginning of a trend, can be due to people consuming less. You will see the reduced spending in the retail and restaurant numbers of May, which won’t be released until June or July? I also noticed people don’t fill up at the pump. Check the pump displays next time you fill up. A Suburban for $40, two sedans at $10 and $15. A woman who told me she only gets $20 each time because it’s too long between pay periods and her husband is thinking of rising his bike to work. A bartender who only puts in $25 because she refuses to pay more than that, so she just goes to the gas station more frequently.

The consumer is running out of steam. I wonder why you say they have kept up the spending? What are you seeing this month? Let’s remember any data out there is dated.

So the conondrum really is the global demand for our debt, which pays a higher rate than European or Asian debt. More demand raises the price, lowering the yield.

This trend will be reversed somewhat as Japan pulls out $200 billion of our debt between March and June 30, 2006. We should see rates rise a little bit. Unless of course the US has some offshore accounts which step in to buy Treasuries. Isn’t anything possible?

(Kind of like that whistleblower from the Transportation Agency who exposed the lax security still existing in airports…the gov’t is kind of too lazy to fix anything. Did you know they still don’t screen cargo luggage, and the terrorists are still highly interested in US aviation? After Irwin published several internal reports bringing this to the government’s attentino, Bush called Irwin (sp?) into his office and said he needed his loyalty. Irwin refused to tear up his reports and told Bush he works to protect the people, as should Bush. Irwin’s contract was not renewed, and he wrote a whistleblower book. This is typical of government. They want to look good, but not do what is best for the people. I can’t find the book , but saw the interview on cnn.com)

The recent spike in gasoline prices seems correlated with reduced spending. Walmart said their shopper is gas-price sensitive, and they make fewer trips to the store, and thus fewer impulse purchases and sales are down a bit. Starbucks is taking a hit attributed, by them, to higher gas prices. I read the high end fast food shopper will downgrade to McDonalds, while the McDonalds customer will stop eating out.

I get your point Rich, and I wonder why people are reacting stronger to this recent rise. Perhaps the magnitude is too large, for people already living on the edge. 75% of Americans say the high price of gas is a hardship. Perhaps the size of the latest jump is psychologically difficult.

Are people avoiding Starbucks bec. they are stretched too thin with this latest jump, or because they’re darn sure not going to spend money on overpriced coffee when gas costs so much? (Actual hardship or psychological)

I expect to see a drop in spending due to MEW slowing, but this would be gradual. This quick impact is due to gas going over $70/barrel.

Pretty soon, the high commodity prices will shop up in more expensive goods. Carpets, food, everything made with oil and transported will be more expensive in a few months. So the higher price will slow consumer spending. Why do we need higher interest rates to curb demand? High oil, in and of itself, is doing the job rather quickly. Higher commodity prices will show up in products make with copper, lead, platinum.

How can our inflation cause higher gas prices on the global futures market?