Economist: Expect Fed to lower Dow to 8,000

[heybales219]

Consumers should expect a deep recession, triggered by the "stealth methodology" of the Federal Reserve to "depress" the market even while lowering interest rates in an ostensible effort to stimulate economic growth, an economic analyst is charging.

"The Federal Reserve is directly involved in manipulating the stock market," said economic analyst Mike Bolser in a telephone interview with WND yesterday.

The New York Stock Exchange finished the day down 108.03 points, closing at 12,635.16, much as Bolser predicted, despite recent emergency Fed rate cuts of 1.25 percentage points aimed at stimulating the economy.

"Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board, and dampening the otherwise harmful effects of inflation.

"A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added.

"Without this recession, we would be on quick trip to hyper-inflation," Bolser, the author of an internationally followed newsletter published in conjunction with his InterventionalAnalysis.com website, (http://www.wnd.com/redir/r.asp?http://www.interventionalanalysis.com/) said, "and the Fed wants to prevent this."
http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=55601

I realize the source is WND and I've seen it on other sites with questionable reputations......but if this is true, what's it's mean for the average American like myself? I'm a simple man so this stuff is somewhat, okay,very, over my head.

[frodo82801]

How would they do this? The only way would be to increase interest rates to 10% or some high level.

[Nova]

I read the article but most of it was over my head. Once we get to discussing bonds, bond insurers & the derivative market, I'm lost in seeing how the pieces fit together.

Is the FED trying to lower the DOW, my hunch is probably not. But they are certainly more concerned about salvaging banking (such as thru the TAF loans to banks) than they are concerned about stabilizing our currency (their mission statement.)

Econo gurus, helps us out here.

[jds6958]

I mostly disagree with the article. The equity markets are the last of the recent wealth inflating pillars supporting the mountain of $500 trillion derivatives. Not to say that a $8000 DOW is not possible (it may even be likely), but the Fed is blatently manipulating the markets to artificially support the markets and thereby delay or prevent near term global collpase of these derivatives, of which $180 trillion is in major U.S. companies. Keep in mind that the U.S. GDP is only about $13 trillion.

The author does seem to understand the the continuing support of the markets could ignite hyperinflation. I obviously support that premise. However, if the Fed was not interested in supporting the markets then a 1.25 cut last month would not have happened, the PPT would go on vacation, M3 would still be reported and would not be increasing exponentially, and an economic stimulous package as a brown bag solution would not be proposed.

Bernanke has said countless times before this crisis hit that the Great Depression was a mistake because the Fed did not eliminate the gold standard quickly enough and begin printing money like mad. If a recession is allowed in this situation we will see a "Greater Depression" and that scares the Fed even more, and rightly so imho.

The Fed will soon be placed in a situation where it will have to let it all collapse or to monitize all that is insolvent in the system. The Fed is obiously choosing the later by actions throught PPT, TAF, discount window manipulation, increase in M3, and an unpresidented rate cut schedule.

It is getting closer to one extreme move in one of these directions. The wolf cycles are becoming more and more violent and eventually a wave peak will breach support and hit a tipping point where all will become transparent and clear.

This is just my opinion, but I am sticking to it until I see contrary action by the Fed. The author, with no merit imho, seems to be imposing and projecting his own wishes on to the Fed.

[RobertB]

How would they do this? The only way would be to increase interest rates to 10% or some high level.
Just check back to the days of Jimmy Carter and see what the interest rates were like. Even back in the early eighties, some house loans were at ten per cent.

[jds6958]

Just check back to the days of Jimmy Carter and see what the interest rates were like. Even back in the early eighties, some house loans were at ten per cent.


True, and that is how we got out of that situation mostly unscathed (although it seemed bad, it could have been a lot worse). The rates protected the USD. But they can not raise rates yet in our current situation, especially to 10%. If we think the credit system and cash flow is sticky now, raising rates would be the nail in the coffin for 90% of every banking instituion in the U.S. The economy would cease to function. This is part of the catch 22. The Fed has to wait until in monetizes most of the problem at the USD's expense. Inflation could rise exponentially and then rates could be raised. In 1923 Germany during there high inflationary period rates hit 90%.

[Nova]

In Dec I sold short on some stocks. Now I'm taking a wait & see attitude. I'd like to invest in the stock market. Because I feel business growth is the only real way to improve the economy. And certain sectors are more likely to prosper-like alternative energy, high tech with a global use base & maybe agriculture (depending on what happens with fuel.) But I expect construction, auto & consumer goods (not related to survival) to take a beating.

Regarding the inflation rate, it is artifically low. I expect big jumps in the price of food & fuel. The Fed is lowering interest rates to promote spending. But those measures will hurt the dollar's buying power.

[GodwithUS]

You have many variables at work in this mess. You have the Fed lowering rates compounded with a dropping value on the dollar. Who wants to hold dollars when they are worthless?

[Nova]

Who wants to hold dollars when they are worthless?

Well, they aren't worthless, but are becoming worth less (sad pun, I know.)

Right now there aren't any good places to put assets. Cash is losing value. Bonds (even inflation adjusted treasure ones) are losing money compared to the real price of inflation. Other bonds may tank this year depending on whether the bond insurers are baledout (with a resulting losses in many pension plans.) The DOW will be rocky-but maybe a better choice, who can say yet? Gold & silver are options (I own some of each), but hate putting all my eggs in one basket.

At least in Dec, I could see what was coming & how to react. Now, I'm in limbo.

[GodwithUS]

I have been checking Ag-Land listings, I am not seeing prices going down. But there will be a lag in all of this. Time will tell.