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The Ghosts of Hallowe'en Haunt the US DollarGary Dorsch The story of Hallowe'en goes back over 2000 years to the ancient Celts. Druidic priests regarded October 31st as the end of the year. Not only was it their day for celebrating the year's harvest, but also a festival for honoring the dead. In order to appease the wandering spirits that they believed roamed at night, the Celtic priests made fires in which they burned sacrifices, made charms, and cast spells.  As they danced around the fires, the season of the sun passed and the season of darkness would begin. As Hallowe'en 2007 approaches, traders in the global money markets are betting that Federal Reserve chief Ben "B-52" Bernanke will sacrifice the US dollar with another rate cut, in order to cast a magic spell over Wall Street. But if "B-52" Ben delivers another big-bang, a half-point rate cut to 4.25%, it might unleash a cadre of evil spirits, ghosts, and demons that would haunt the US dollar to its graveyard. The US housing slump, already the most severe in more than a decade, has taken another turn for the worse, and has convinced the vast majority of global currency, commodity, and stock market operators that the Fed will opt for a small 0.25% rate cut on Hallowe'en eve. The Bernanke Fed shocked the global markets on Sept 18th, with a half-point rate cut to 4.75%, justifying the aggressive cut as a pre-emptive strike, to keep the credit crunch from toppling a faltering US economy. US sales of previously owned homes and condos fell 8% in September to a record low of 5.04 million annual units, amid tighter lending standards, and a meltdown in BBB sub-prime mortgage debt to 25 cents on the dollar. The slower pace of sales drove the inventory of unsold homes to 4.40 million, representing a 10.5-month supply, the highest since 1999. The national median existing home price for both single-family and condos dropped 4.2% from a year ago to $211,700. Guru "Easy" Al Greenspan, the "godfather" of the sub-prime mortgage crisis, said on Sept 16th, he would not be surprised if US home prices fell by double-digits into 2008. A fall in home prices on that scale would be unprecedented in US history. US residential real estate has an aggregate value of about $21 trillion, and is the single biggest source of US household wealth. If home prices fall 15%, it could wipe out $3 trillion of household wealth, and deal a huge blow to consumer spending.  A double-digit decline in US home prices could also spark big job losses. Construction employment fell about 15% in both the 1990's and 1980's recessions, and it dropped 18% in the recession of the mid-1970's. In each case, the sector's declines were far steeper than job losses in the overall economy, and the recovery took longer. About 7.6 million Americans workers are employed by construction companies, so a 15% decline would translate into the loss of 1 million jobs. Building permits fell 7.3% to an annual rate of 1.23 million in Sept, the slowest pace since the March 1995. Last Friday, the yield on the US Treasury's 2-year note plunged to 3.78%, the lowest in two years, discounting Fed rate cuts of 50 basis points to 4.25% by year's end. The Bernanke Fed is slashing the fed funds rate at a time of extreme hyper-inflation in the global commodities markets, with crude oil hovering near $92 /barrel, gold eyeing $800 /oz, and soybeans above $10 /bushel. The US dollar is skidding to record lows, making a sham of the US Treasury's "strong dollar" mantra.  Old timers can remember the days when central bankers would respond to higher commodity and oil prices by lifting interest rates, to keep inflation in check. But in today's world, global central bankers are addicted to double-digit money supply growth, in order to inflate their economies to prosperity. The net result is the onset of "Hyper-Inflation" that is fueling near parabolic rallies in many commodity and stock markets, and sea-borne shipping rates are up 150% this year. To read the rest of this article, click on the link below: http://sirchartsalot.com/article.php?id=72 Oct 30, 2007 321gold Ltd |
