Wednesday, March 17, 2010

There's Quiet Before the Storm; Fed Funds are at 0.18%

Mt. McKinley vp  Michael Dunton fills us in:
Back to 18.

Looking at the TED spread (spread between 3-month LIBOR and 3-month T-bill) suggests nothing is moving--that spread stayed pretty much constant the last few weeks, going no lower than 10. At the height of the crisis it was above 100 (I think).

Just what is being cured by keeping these low rates? It would seem to me that we'll soon discover how poisonous the low rates will be.
The Ted spread quiet is part of the trap that is being set by the market. The market is trying to establish a structure similar to what existed pre-panic, but the money isn't there.

The old structure was at much higher interest rates. As rates climb, it will take huge amounts of new funds to slow the increases. If the Fed provides them, it will be very inflationary and time to buy gold again. The market will, in a way, be forcing the Fed to choose either inflation or deflation. One, or the other, is coming and very soon. This is not the time for theoretical discussions. It is a time to think out possible scenarios and how to positon for them.


  1. I believe a liquidity evaporation could occur at any time, where one may not be able to get access to one's funds in a money market account or brokerage account. I strongly recommend that one invest in gold coins, gold at and gold in the gold ETF, GLD, in a trust account not a brokerage account.

    I believe that the Treasury will one day soon not be able to auction US Bonds, and there will be a sudden economic collapse. The price of oil will soar because no one will want to take dollars. The only thing that will have value will be gold.

  2. The point of the article was that the Fed has the power to initiate either an inflationary or a deflationary cycle. None of us on the outside know which direction that will go.

    Any "anonymous" "free" "advice" pointing to one website is suspicious. In the case that the Fed doesn't provide the funds, people who happily bought gold at $1100/oz will happily sell it at $800 just for rent money. When all the gold bugs become gold bears, GS, JPM, and co. will buy up all that gold and sell it back to somebody on the street for $1100 again.