“The financial storm that reached gale force some weeks before our last meeting,” uttered Ben Bernanke on Friday, “has not yet subsided."
The Fed chairman must have found inspiration for that soaring metaphor atop Grand Teton… he and a brood of monetary thinkers gathered in Jackson Hole again this year to justify current policies and have an excuse to wear fleece 24/7.
Bernanke stuck with the status quo -- the Fed is still more concerned with “downside risks to growth” than inflation. In fact, Bernanke told the world he found the recent dollar rally and commodity correction “encouraging.”
"If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next."
That’s a big “if.” For whatever it’s worth, the market has largely interpreted Bernanke’s speech as a signal for rates to stay the same in the near term.
Economists around the country agree. 46% of American economists believe a “financial crisis” is the biggest current threat to the economy , reports the National Association for Business Economics today. While that crisis remains the most popular concern among the nation’s economists, we notice a particular change from the NABE’s last survey, in March.
Specifically, that “financial crisis” group has shrunken from 52% of respondents in March. And this time around, 16% of those surveyed said energy prices were the chief economic concern, up from 5%. Likewise, 15% said inflation is our economy’s greatest threat, up from 10% in March.
And here comes that next financial crisis: Fannie Mae and Freddie Mac are suffering from another round of bad news this morning.
First, early Friday morning, Warren Buffett puckered up for a kiss of death from the private sector. “They're looking for help, obviously,” he told CNBC. Buffett told Becky Quick that he had been approached by Fannie and Freddie for help, and that he took a pass. “The scale of help is such that I don't think it can come from the private sector."
Later that day, Moody’s downgraded Fannie and Freddie debt by five notches, to Baa3. That’s that lowest possible rating a company can garner and still be considered “investment grade.” In other words, Fannie and Freddie are one step away from being “junk” bonds. Think about that for a second… pathetic.
And this morning, we hear China’s second largest bank is dumping its Fannie and Freddie paper. China Construction Bank reduced its bond- and mortgage-backed securities by 37% at the end of July, CCB President Zhang Jianguo told reporters. That’s scaling back by “only” $1.2 billion, but it’s a trend we expect to accelerate in the near future.
The Fed chairman must have found inspiration for that soaring metaphor atop Grand Teton… he and a brood of monetary thinkers gathered in Jackson Hole again this year to justify current policies and have an excuse to wear fleece 24/7.
Bernanke stuck with the status quo -- the Fed is still more concerned with “downside risks to growth” than inflation. In fact, Bernanke told the world he found the recent dollar rally and commodity correction “encouraging.”
"If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next."
That’s a big “if.” For whatever it’s worth, the market has largely interpreted Bernanke’s speech as a signal for rates to stay the same in the near term.
Economists around the country agree. 46% of American economists believe a “financial crisis” is the biggest current threat to the economy , reports the National Association for Business Economics today. While that crisis remains the most popular concern among the nation’s economists, we notice a particular change from the NABE’s last survey, in March.
Specifically, that “financial crisis” group has shrunken from 52% of respondents in March. And this time around, 16% of those surveyed said energy prices were the chief economic concern, up from 5%. Likewise, 15% said inflation is our economy’s greatest threat, up from 10% in March.
And here comes that next financial crisis: Fannie Mae and Freddie Mac are suffering from another round of bad news this morning.
First, early Friday morning, Warren Buffett puckered up for a kiss of death from the private sector. “They're looking for help, obviously,” he told CNBC. Buffett told Becky Quick that he had been approached by Fannie and Freddie for help, and that he took a pass. “The scale of help is such that I don't think it can come from the private sector."
Later that day, Moody’s downgraded Fannie and Freddie debt by five notches, to Baa3. That’s that lowest possible rating a company can garner and still be considered “investment grade.” In other words, Fannie and Freddie are one step away from being “junk” bonds. Think about that for a second… pathetic.
And this morning, we hear China’s second largest bank is dumping its Fannie and Freddie paper. China Construction Bank reduced its bond- and mortgage-backed securities by 37% at the end of July, CCB President Zhang Jianguo told reporters. That’s scaling back by “only” $1.2 billion, but it’s a trend we expect to accelerate in the near future.
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