The US economy is going into a recession. It is inevitable. CNBC had guests who are misinterpreting the “Hawkish” comments from some of the Fed's people. It is not that interest rates are rising, but how fast the “carry” trade is removed. This recovery is based on the “carry” trade. See:
Remarks by Governor Ben S. Bernanke At the Sandridge Lecture, Virginia Association of Economics, Richmond, Virginia March 10, 2005
also see:
Remarks by Chairman Alan Greenspan Consumer Finance At the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005
Oil is going to be propel upwards. Remember, China has a command economy. The government has placed ceilings on prices its citizens pay on final goods and services. This will show up in the US current account deficit as US companies slash domestic jobs to meet Wall Street's expectations.
The removal of the carry trade and higher prices at the gas pump is going to blow thru this economy. The unlikely candidate as a conduit, is going to be the sub-prime financial system. The biggest ones are the GSE's Fannie Mae and Freddie Mac. See:
Testimony of Chairman Alan Greenspan Regulatory reform of the government-sponsored enterprises Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate April 6, 2005
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