Crash looming?

http://www.gata.org/node/6381

Can they not go lower than 1%? Couldn't they go into the neg in an emergency to flood the banks with cash?

The Fed can certainly take the fed funds rate down to zero percent.

This is what Japan did in the wake of the 1987 crash of their real estate and banking sectors. Doing so trapped Japan into a deflationary spiral from which they seem unable to extract themselves.

This outcome (trap) is something Fed Chairman Bernanke has stated is not desirable, and he will do whatever it takes to avoid it.

The Fed is being slowly forced into a corner from which few options exist.

In terms of flooding the banks with cash, the Fed has already done that and it has had no effect on the problem. The banks are not lending any money to anyone and instead are hording the cash, investing it into short term Treasury paper, and forcing the 3 month T-Bill rate to zero. This is why yesterday the Fed instituted the new lending facility directly to the commercial paper market. To bypass the banks and provide cash directly to US businesses to fund current operations (for payroll and raw materials...)

So do you think that this $700 billion bail-out, and the $200 billion to banks is all that the markets need with time? If not what do you think is needed? Housing may have shown some signs of bottoming, maybe its already hit a bottom.

I don't think that housing is showing any signs of bottoming. Take a look at this page: http://housingrdc.cme.com/ which shows the futures for the housing market on the CME. Click on the drop down that says "Select a Contract Month" and compare the Last Price of the Composite in each contract month going forward. You will see that the anticipated price of the housing market in the future contract months is still significantly lower than what it is today.

The reason that I put such weight on this particular market is because the people trading these contracts are putting their money on the line. The people that you hear telling you that the housing market has bottomed are Realtors who have an ulterior motive in convincing you of this fact. You will also hear this from homeowners who have seen the value of their houses decline - this is optimistic wishing on their part - which is natural and expected - but not indicative of where the market will go.

Follow the money...

I've started a new topic dedicated to the bottoming of the housing market.

Daytrading,

My dad has been in housing for 35 years so have my brother-in-laws and I am licensed contractor, I built 8 homes from the bottom in '02-'05 and I GUARANTEE I put more money on the line in housing then some daytraders I called the housing bottom in 02' while every one else in my town didn't dare build...You have to predict housing a lot different than the stock market if you wait for the bottom by the time your spec is done the market is flooded. Its just like trading, i.e. build/trade when all others are scared and sit on the sidelines when mom and pop are coming out of the woods...intrest rates are low, building material is cheap, gas is lower. The only thing missing is the banks willing to lend money and the FED is bent on changing that, so its a no duh thing to all of us contractors who pulled out at the highs to get ready for some spring building.