Gut Check

The Fed Directors will have a real challenge on Sept. 18th, and will probably fail the Test of responsible leadership. The Vultures are already out to recoup their overextended positions in the Mortgage markets, and the BLS labor report with its revisions for June and July as well as the 4000 Job drop will mean heavy pressure to reduce the Interest rates. A review of basic economic conditions, though, may express the futility of this effort, while actually causing a defusion spread of Risk out of the overextended Mortgage market to the general economy.

The Construction industry has been overheated for a considerable time, with the Stockpile of unsold Homes gaining for more than a year. Commercial Construction has been exceedingly rapid for over two years, and Land Prices and Public Utility expansion has been hard-pressed. Reality states that the Construction industry has to cool off, and that Job losses in this industry will remain permanent, no matter the positioning of the Fed fund rates. The other major areas of Job loss lay in the arena of Mortgage finance, Hedge funds, Securities, and Banks–exactly those places which brought Us the Mortgage Crisis to begin with; Rehires in this sector could only worsen the above-mentioned Crisis.

There is no reason for the Fed to shift current policy until there is a definite Job loss trend developing in the Manufacturing sector. There stands very valid reasons to maintain the present Fed policy, mainly centering on the need to reduce the Mortgage Crisis by forcing the Securities firms to reduce the current Risk threat by absorption of their losses. One has to understand Most of such losses are in the form of Book losses, said Profits derived by unsafe financial practices generating the Crisis in the first place; the Thieves want to claim their ill-gotten Gains are real money, and not the Inflationary Paper which it is and always has been. The Fed can straighten out the American financial markets, or themselves become another aspect of the Problem. lgl