Judging by their recent history, I would say it is almost guaranteed they wouldn't see it coming until it was too late.
America still is the biggest manufacturer in the world...just more efficient. http://www.plantengineering.com/art...etroit_U_S_manufacturing_shows_its_muscle.php ...Analysts quoted by Reuters said while manufacturing as a percentage of GDP is down, as is overall employment in the sector, the efficiencies of U.S. manufacturing are still formidable. "That contraction is progress," said James Schrager, a professor at the University of Chicago Booth School of Business. "We have a larger output of goods and services than ever and we have a smaller number of workers doing it." "The U.S. still manufacturers more than any other country in the world," said Tom Murphy of RSM McGladrey. "We're just making different things than we made in the past and we're making them differently. That's not going away just because of what's happened in the automotive industry."
Well, I am not sure I would completely agree with you there, PI... It's all about the timing. I agree that 'eventually' asset price inflation will, in fact, filter through to CPI. However, it's certainly not going to happen now or at any time very soon. I am quite sure of that given the state of the money mkts (the manifestation of the deflationary forces). So what we have then is dangerously strong deflationary trends in the short run, which can only be countered by methods that inevitably introduce inflation some time down the road. So the Fed is in fact walking a tightrope and is risking quite a debacle down the road. The potential for a very serious policy mistake is there, for sure. However, I don't think doing nothing is an option. Their argument is that they will fight the inflation battle when that time is upon them. Until that happens, there are other, more immediate dangers. I like this blurb about the Fed's policy dilemmas: http://www.ritholtz.com/blog/2009/06/can-the-fed-execute-a-perfect-landing/
seven days later why not kick in my 2 dollars (inflation) I go with the Von mises definition. Inflation is the expansion of the money supply. CPI is the wrong tool to measure inflation. Didn't you guys learn when the CPI was reporting 2% and houses were moving 15% The CPI is bullshit propganda money supply expansion is inflationary period. it doesn't matter if your milk is still 2.00 because the egghead will never know where the market decides to stick the excess capital until it's too fuckin late Goldman record bonuses that's not a sign for you. When money is printed those closest to the point of creation benfit the farther removed the more likely you will lose and be the last too know it's amazing tha after hundreds of years people still buy the bullshit line that printng money is not inflationary
Here's something for perspective . . . On it's own, California is still pumping out around $1.5 Trillion in gross state product. That would probably put it around the 10th largest economy in the World. One of the more interesting discussions and threads on ET in a long, long time. Kudos to all who have participated!