Nor_LA-Temcu-SD-Guy

At some point I would think, the Fed will have to launch a defense of the dollar,

How ??? would they buy dollars (with what ???)

Would the raise interest rates and crash the economy ????

At this point they may as well raise interest rates , subprime is dead and houses are too expensive (at least in So-Cal) for the average (joe/jane) to buy at any interest rate anymore.

The Fed is under no obligation to to protect the value of the dollar. The Fed has two mandates:

1. Full Employment
2. Price Stability

The value of the currency only affects #2 negatively if the currency is falling fast enough to cause import prices to drive inflation. And since China is still quasi pegged to the dollar that’s not happening as much as you would expect.

Actually, I’d argue that the Fed has failed miserably at “price stability.” Although it has been magnificent at playing the game of “the marketing of the appearance of price stability.” Anyone who believes the government’s CPI stats with their “rental equivalents” and “substitution effects” is a nutjob. Inflation’s gotta be running at least 2 percentage points above what the govies are reporting to us. See John Williams’ Shadow Statistics for the details…

SD_R, I am looking forward to some pros surfacing to weigh in on this.

Chris, are you in the interest rate business? I haven’t gone through all the archives, but I would have guessed you played mostly with your own money, and across multiple asset classes, mostly equities. Maybe I’m muddling the posts.

Patient renter in OC

I’m no good at predicting it either. However, it is following the same pattern as last year, skyrocked above 5 Junish and came back down end of summer/fall. If last years pattern is somewhat of a predictor you may see it get close to the 4.6…

The “flight to quality” from CMO and junk bonds has increased demand for US Treasuries. Are mortgage rates decreasing in response? Is the “subprime slime” making mortgages more affordable?