Monday, May 15, 2006
Market mayhem
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

The FTSE 100 is down 140 points following a 130 point drop on Friday, with the immediate cause being the sliding dollar and the US government's apparent policy of benign neglect. Alan Greenspan's baptism of fire was the October 1987 stock market crash. Is this Ben Bernanke's? At the very least talk of higher interst rates will evaporate if this continues.

Comments

"Is this Ben Bernanke's? At the very least talk of higher interst rates will evaporate if this continues."

I think that’s the game of ‘chicken’ that Bernanke is being confronted with. The argument for the run-up in the price of gold is that, faced with the rise in unemployment and a possible recession that further rate increases could bring, Ben will print dollars and accept higher inflation. (There’s an extra political pressure too as Republicans won’t want an "social" crisis on top of their other problems.)

I think Bernanke is tougher than he looks and will raise rates regardless. However, the other FOMC members may be easier to fix politically.

Posted by: sandid at May 15, 2006 11:45 AM

The FTSE fall has been pegged back to just over 50 points. It all now depends on Wall Street. This may just be a passing squall.

Posted by: David Smith at May 15, 2006 12:19 PM
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