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Posted by warren mosler (72.161.109.198) on 09:09:56 11/20/07
>
> Starts up 3% (stronger than exp), but permits (leading indicator) down 6.6%.
>
> Single family permits down in all 4 regions.
> Also jump in starts was due to rebound in multi-family from a large decline
> prior month; single family starts down another 7.3%.
>
>
>
> Fed forecasts at 2pm today likely to be all over the place. All 17 members
> to submit forecast (not just Governors). Will toss out 3 highest and 3
> lowest forecasts for each indicator for each year.
Right, key is whether housing is slowing in line with Fed forecasts.
It's slowing in line or a little less than expected by private
forecasts, so it probably isn't slowing any more than Fed forecasts as
they are generally similar to private forecasts.
>
> Debate between 2 Fed 'insiders' last night highlights potential debate:
> Martin Feldstein states that FF rate should go to 3% handle ASAP and net
> exports via weaker $ are best hope for U.S. gwth in 2008; Allan Meltzer
> responded that credit crunch issues have little to do with FF rate and the
> Fed should hold fire.
Neither have been considered relevant for decades.
>
> Some interesting news out of Eur:
>
> (FT) Growth in European Union financial services went into
>
> reverse in October, with the sector reporting its first monthly
>
> contraction since the terrorist attacks of September 11 2001,
>
> according to details of purchasing managers' indices published
>
> on Monday by NTC Economics.
>
> And Canada, where CPI today opens door for easing.
>
> -Core cpi fell by 0.2%(exp +0.1%) with y/y dropping to 1.8%, lowest since
> 6/06.
>
> -Main increases in CPI were due to mortgage interest and property tax hikes
>
> -Items sensitive to a strong C$ were all lower:autos,clothing,& computers.
>
Right, the Fed would probably like to see the $ recover via lower
rates out of the eurozone and other CB's, and the other CB's don't
want to the Fed to cut as they are more than concerned about their
currencies hurting their real economies.
The Fed is giving the appearance of a classic 'beggar thy neighbor'
policy of 'competitive devaluation' that used to happen with the gold
standard and fixed exchange rates. The Fed cuts, international
portfolio shifts weaken the $, US exports rise, and foreign domestic
consumption suffers.
This was and is considered very bad form, and it's what the US has
been accusing China and others of doing. I'm sure the Fed has been in
discussion on this with other CB's who don't want to follow the
aggressive 'inflate your way out of debt' lead of the US, which is
considered the highest risk strategy possible for a CB, as they all
believe low inflation is a necessary condition for optimal long term
growth, and they all believe that inflation will accelerate if
inflation expectations elevate, and that if healine cpi continue to
trend higher the odds that core climbs to headline increase to
certainty as ultimately they do converge.
Meanwhile, Jan ff continues to price in a cut with near certainty, and
I expect the Fed to continue to try to jawbone it to 'neutral.'
Warren
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