Omnipotent Fed Govs trump everything else

Stocks surged today. It was the biggest one-day point gain for the Dow Industrials since last July. And what got the party started? As expressed in the recently released Beige Book, the cabal of current Fed Governors can't see anything big and/or bad that could possibly derail the sprite "0-point-6-percent" growth of the U.S. economy. Not inflation, not a housing crash, nor private-equity and hedge funds spewing-out debt like drunk frat-boys spew chunks of half-digested pizza and beer. No nothing seems capable of halting this vibrant economic Adonis; so say the omnipotent Fed Governors. Even tech and semiconductor stocks enjoyed a huge bounce. Forget the fact that the Semiconductor Industry Association (SIA) lowered its forecast for 2007 global microchip sales growth from 10 percent to 1.8 percent today. No, its all good. In fact, Larry Kudlow has even gone so far as to proclaim the nearly 20-percent increase in the cost of borrowing 10-year paper (from 4.5% to 5.25%) is just a "symptom" of "vibrant worldwide growth" (read: growth trumps higher rates). But what if the spike in yields has nothing to do with "vibrant growth" and instead is a symptom of Asian reserves shopping for places to park their cash that where it won't get ravaged by inflation? After all, this back-up in rates for whatever reason seems to have coincided within weeks of a number of countries making their intentions known that they'd like to distance themselves from the U.S. dollari (read: Argentina, Brazil, Kuwait, United Arab Emirates and Syria). That's a trend that might not be so good, Larry. Especially in a world where the U.S. depends so heavily on the kindness of strangers and artificially low yields; not to mention the obvious--that there is more leverage embedded within the world's financial system like never before. And by the way, Larry, didn't the 10-year rate drop considerably from 1994 thru March 2000--the last time real U.S. GDP averaged above 4-percent per year for an extended period of time? Using your logic, rates should have been rising. And couldn't this spike in rates, just maybe, inflict some pain in a world where speculators have laid a few trillions of dollars worth of plans designed for a world awash in plentiful and cheap credit as far as the eye can see? I don't know, maybe, but maybe not.