Market experts at Falling Sky Investments

The panel of experts on NBR last week sounded like a panel of Chicken Littles.

One fellow was asked what happens if the Fed fails to cut interest rates at its December 11 meeting.

"Watch out below," he says. "Both stock and bond markets are sending the signal that there is weakness ahead." Depending on rate cuts is "hair of the dog" medicine at best for the economy. A "Let's see if we can start another borrowing binge" answer to embedded, fundamental failures in the current economic scheme.

The whole affair can be found on the 11/28/07 podcast.

Notice, among other things, the comment that the banking sector is not threatened with insolvency, but at the same time may not have enough capital. ......... ....... ...... Citigroup went after petrodollars, offering, as I understand it, junk bond returns. This means that liquid credit pumped in by the Fed is not enough. It must have real cash. Now. And the dollar so cheap.

To repeat, rate cuts may affect the economy 12-18 months out. The last great rate cut program, started by Alan Greenspan in 2000 and carried through the next four years, managed to produce the housing bubble and bust that is now one of the principle burdens going forward.

So the question seems to be Which way do we run? Into the building? Out of the building? Are we cut off from leaving the country? This is the confusion. The confusion is not whether the banking sector is in bad shape. It is whether the Fed with cheap money can bail out the sector.

Some will accuse us of being Chicken Little as well. Aren't we making the most dire predictions of anybody? Let's be clear. We are saying the collapse has occurred. It wasn't the sky that fell. It was the flimsy structure we pretended was a working economy.