Open One Window Close Another

The Fed would like to open one window and close another. The first window being the discount rate strategy which soothes some of the liquidity issues for banks and more importantly promotes the image of a watchful central bank. On the other hand, closing the window on the Greenspan era is something Bernanke is trying to pull off but is finding it to be a tricky given that the markets may believe he has already created the ' Bernanke Put.' Regardless of the unemployment number on Friday the market will be concentrating on various strategies by the end of next week. A large treasuries bet has been placed and significant damage would be done initially to that market if the Fed were to avoid cutting rates. The bet primarily is that the Fed will cut and continue to cut. If they do not, it is reasoned, the market's resulting downside will force their hand anyway. The dilemma for the Fed is that there remains a sea of cash ready to move across stocks, commodities, and yes, even in real estate. It would like to temper demand by at least having the threat of higher rates as a weapon. Some are hoping Bernanke may reveal his intentions prior to their meeting allowing the for the adjustment to the up or down meter.