Thursday, November 30, 2006

Jittery Stats Day Today

The PMI (Purchasing Managers' Index) is troublesome today (Source: kingbiz.com), making gold go up and the dollar go down. Yesterday, we had a somewhat confidence-inspiring GDP (gross domestic product) report at the same time as a disappointing employment report.

Markets are jittery at this juncture, because they know the Fed is watching all of these stats and will act according to their interpretation of them, by adjusting their the discount rate and/or the Fed funds target rate.

It is these adjustments that have helped to cause the recent real estate boom, in my unscientific opinion, and they will also cause the coming sticky situation when the Fed cannot decide whether to support the American economy by lowering rates, or to support the US dollar by raising rates.

Iraq isn't the only rocky hard place the US finds itself caught up against.

This gives me an oblique chance to poke some fun at a Federal Reserve booklet called "The Story of the Federal Reserve System," put out by the Federal Reserve Bank of New York in 2004. Some of these booklets are well done, and some are full of baloney. Here's one objectionable frame (click on it for a larger version):

Federal Reserve System booklet extract

And here's what I say it should read (click on it for a larger version):

Parody of Federal Reserve System booklet

More next time. (Let me know if you can't read the text in the bubbles.)

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