TheStreet.com's Jim Cramer says to ignore the inflation worrywarts; the Fed needs to keep easing to keep things in check."Mounting Inflation Concerns Weigh on Fed's Next Move."
Here's where we need Rupert Murdoch to exert control over the Journal. Here's where we need some real intervention from someone with business sense.
That's right, because we have seen a "mounting inflation concerns" headline about the Fed pretty much every week since the easing began. It's become something like "DA Probes Rackets," when there's nothing else to write about.
Do you realize that we have had gigantic easings right after Fed frets of inflation or when some Fed head says nothing's wrong and the fundamentals are sound? Do you realize that even under Murdoch, there is no accountability for this stuff for anyone -- neither Fed nor the WSJ?
Not long ago, I was being interviewed on "Squawk Box," and Greg Ip, a Journal Fed reporter, was commenting on the surprise 75-basis-point cut that morning. The week before he had written one of those stories that can best be stated as "Fed worried about inflation more than growth," which was the classic throw-off-scent play. Either the Fed was dead wrong or his paper was.
I wanted to know which it was. But that's like asking some guy to betray his country over at the Journal, so he took the equivalent of the Fifth.
So for the millionth time, I will spell it out: The easings have everything to do with crisis and nothing to do with growth. Of course they are inflationary. But the crisis has to be averted. I would also argue, unlike the people on the Fed, that we are in a "deflationary" spiral not an inflationary one, because a deflationary spiral is what happens when your most important asset, your home, declines in value.
So, when you sell because of this story, remember: we have seen far more of these stories than we have of this kind: "Fed will cut rates to avoid bank runs," but only the latter is the truth.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
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Reader Comments (Page 1 of 1)
2-08-2008 @ 11:25AM
AJGORM said...
Jim,
Cutting Fed rate is helping. Mortgage rates are the real problem. If rates on home loans came down lowering the cost to the home buyer we would be selling more homes. The compounded problem however may cause an inflationary spiral ?
2-08-2008 @ 1:20PM
claudette Dumont said...
I have a question-and I don't know where to direct it to have an honest answer.
BCS--I'm down $1,200--on a close to a $4,000 investment (have a small budget) -I bought it with us money when it when it was high.
Can you help me with this or direct it to someone who would know about this.
My advisor is Edward Jones but they are not answering.
Claudey
2-08-2008 @ 3:05PM
Lunaymar said...
All you hear from Wall Street is "Rate cut, blah blah bla, rate cut blah blah blah, rate cut blah blah blah". In the meantime, we will be using our entire paycheck to pay for a loaf of bread and a container of milk. No more rate cuts! Let this financial fiasco work itself out. It was this rate cut nonsense that got us to the edge of the cliff.
2-09-2008 @ 10:43AM
Gary Bennett said...
If rates go lower are people going to refi and hunker down or cut and run and try to move up in housing. Have we learned our lesson?
2-10-2008 @ 8:36PM
cmonterroza said...
I couldn't agree more, Jim.
Fostering industry wide refinancing and getting a positive spread between the two year treasury and the fed funds rate is key if we want to get out of this crisis alive. Right now the financial intermediary system needs all the help it can get. I wouldn't be surprised if we saw a surprise cut by the Fed before their meeting again.
2-12-2008 @ 6:04PM
cactuspete54 said...
Please, Please, Please, Mr. Fed man, Please cut the rates. If you don't free market will take over, stocks will go down, no one will watch my show and my new wife will leave me ...... Cramer
2-13-2008 @ 5:22AM
dzeien said...
Interest rates are only one factor in the decission to buy a home in this current market. Taxes, Insurance and energy cost's are uncontrollable and like medical going out of reach. You can offer a fixed payment plan for 30, 40, 50 or 60 years but these requirements are escrowed with cushions for the mortgage companies and they will require more monthly increases. This is going to be with us for a long time to come.