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Every Fed Chairman comes with a slump

Written by A Forex View From Afar on Monday, January 21, 2008

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Two years ago, when a fresh-faced Mr. Bernanke took control, how many Traders had said we are going straight into a recession in short-time? Now, we are at the beginning of a recession, at least some Analysts say. Even if the Fed manages to avoid recession, the 2007 sub-prime crises will certainly remain in history, like the '87 market crash or the '98 LTCM crash.
A simple history study shows us that in the last 50 years, every new Fed Chairman came with a recession in his briefcase. Mr. Bernanke is about to open his briefcase and take a good look at what Mr Greenspan packed in there for him.

We'll begin our journey from the end of the Second World War, which leads us directly to the '48 recession. Thomas B. McCabe was there to handle it as a Chairman for just 6 months. In the year 1951 William McChesney Martin arrives as Chairman. Almost 3 years after his appointment he encounters his first recession, by July 1953.

From 1970 to 1978, Arthur F. Burns serves as Chairman, meeting his first recession after 3 year.
In 1978, G. William Miller is voted in as the Fed's Chairman and he is seen as one of the weakest. He had only a short stay at Fed, about 18 months. The Economist newspaper said that "America's central bankers have all made their weight felt across the political sphere, with the possible exception of William Miller, whose brief tenure in 1978-79 was notable for his attempts to ban smoking at the board".
In his short time staying at Fed, he didn't have any recessions going around, but he caused a recession that his successor, Mr. Paul A. Volcker had to fight between 1981 and 1983. Since the Great Depression, this is the longest recession US has had; 16 months.

Mr. Volcker's stay as Chairman from 1979 to 1987 and was followed by Mr. Greenspan. Only two months after taking his role, he had to fight the 1987 stock market crash, also known as black Monday.

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Now, Mr. Bernanke was appointed as the Fed Chairman and he finds himself in the same situation as his predecessors, facing a market crises.

So, what do you think? Is it a curse or a baptism from the Dollar Witch? This dilemma will certainly affect the Markets again right now. Ahhhh, the life of the Fed Chairman....

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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