Next Fed Staff Notice: Warsh Sworn In By Cheney

Friday, February 24, 2006

Sometimes the things not said may be the interesting part of the news. Today the Federal Reserve Board (FRB) announced that Kevin Warsh took the oath of office - administered by Bush's vice, Dick Cheney - as the youngest Fed governor ever. Warsh's term ends on January 31, 2018.
And how about the other nominee, Chicago university professor Randall Kroszner? He went through the Senate's hearing the same day as Warsh but did not get sworn in today.
While Warsh has yet to prove his qualifications for the job, it is understandable that everybody at the age of 35 would be thrilled to get this position. Youthful optimism is certainly a good prerequisite for the giant task he faces.
Thinking again about governor Roger Ferguson's abrupt exit from the FRB and the advancing anti-Western tensions in the Islamic world, oil prices firmly established above the $60 level, today's surprise in durable goods orders - which fell 10.2% - that reconfirm the bleak economic outlook we seem to be up for some very interesting times.
Travelling cyberspace I take note that both the Iranian Oil Bourse and the discontinuance of M3 data are seen as possible catalysts for the breakdown of the over-extended US$.
I also take note that the majority of worries about the future focus on the possibility of either a war against Iran - participants have to be determined yet - or a financial fallout if (or when) investors will suddenly change their yield expectations in the light of a dramatically altered landscape where yesterday's borrowers have evolved into today's lenders.
The dependence on the greenback seems to slide to the status of a burden currency that will be held up some more time by the reintroduction of forex market interventions and a return to positive real interest rates. It looks as if the ongoing dollar dilemma first will have to overcome the "too big to fail" myth that has temporararily preceded most grave economic shifts before sentiment turned towards the point where nobody wanted to be out last.
Interesting times indeed.


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