[mattduke]

"If turbulent financial conditions and the associated downside risks to growth persist, monetary policy may have to remain accommodative for some time."

reuters

[seldom_seen]

With monetary inflation the official policy of the US federal reserve.

One has to wonder, at what point do they break the back of the dollar? There has to be some threshold, some tipping point of currency debasement where things go from being annoyingly expensive to completely broken, game over.

[DantesPeak]

I would not be surprised if the Fed cut rates 1/2% as early as Friday, mostly due to the panic liquidiation in mortgage market as Citicorp dumps $45 billion in mortgages - creating a market decline which causes hedge funds to receive margins calls on their remaining stock, mortgage and derivative portfolio.

In other words, we are already into the meltdown stage, and I'm sure the Fed has realized that - it just doesn't know quite what to do when oil is about $106 and still moving up.

They will in the end decide that they don't want to see what will happen if the chain reaction continued, so they will cut rates and make borrowing easier for large banks.

$this->bbcode_second_pass_quote('', 'C')arlyle unit misses some margin calls
By Martin Arnold and Harry Sender in London

Published: March 6 2008 13:01 | Last updated: March 6 2008 13:01

Carlyle Capital Corp became the latest casualty of the banks’ increasingly unforgiving attitude towards even the most powerful private equity funds on Thursday when the highly leveraged mortgage-backed securities fund said it had failed to meet margin calls from some of its lenders.

The fund, listed in Amsterdam by the Carlyle Group last year, has been hit by a fall in the value of its $21.7bn portfolio of AAA-rated residential mortgage-backed securities, illustrating that even the safest investments can be perilous when combined with the use of massive amounts of borrowed money. Carlyle had $28 of borrowings for every $1 of its own money.

Shares in the fund fell sharply after the announcement, dropping 58.3 per cent to $5, well below its $19 issue price in its initial public offering on July 4. Its equity was worth $255.4m at the close of trading, well below its net asset value. On Thursday, it said seven of its 13 banks had submitted $37m of margin calls to CCC on Wednesday.