Calamity Poole - Thursday 16th August 2007

Well, bless Poole's beautiful hide...!

ONLY A "CALAMITY" would justify an interest-rate cut now, says St. Louis Federal Reserve chief William Poole.

   In which case, he either liquidated his personal stock investments before June...or the guy's got some real hide.

    "The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers," says the New York Fed. And as you can, it's slipped sharply below target...closer to the current yield on 10-year Treasuries, in fact.

   So why does the US central bank insist on lending fresh cash to the money markets through its open-market operations? The Fed's put in $88 billion over the last week, ostensibly to keep the Fed funds rate on target by making money more readily available.

   Some $36 billion of that liquidity is still outstanding right now (as of 10:20 EST, Thurs 16 Aug.), with the latest $17 billion being auctioned for repurchase agreements right around today's Wall Street open.

   Does that make the current slump in global asset prices a calamity yet?
Adrian Ash, 16 Aug '07

Adrian Ash runs the research desk at BullionVault, the world's fastest growing gold ownership service. Formerly head of editorial at Fleet Street Publications – London's top publisher of financial advice for private investors – he was City correspondent for The Daily Reckoning for four years, and is now a regular contributor to 321gold, FinancialSense, GoldSeek, Prudent Bear, SafeHaven and Whiskey & Gunpowder among many other leading investment websites. Adrian's views on the Gold Market have been sought by leading news organizations including the Financial Times, Bloomberg and Der Stern in Germany.

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