"Worst business cycle since the Great Depression." <object type="application/x-shockwave-flash" width="450" height="370" wmode="transparent" data="http://www.liveleak.com/player.swf?autostart=false&token=f49_1204403165"><param name="movie" value="http://www.liveleak.com/player.swf?autostart=false&token=f49_1204403165"><param name="wmode" value="transparent"><param name="quality" value="high"></object> I sound like an arrogant prick, but this is Macro 101. Excess credit creates inflation & weak dollar. Weaker dollar suppresses bond prices. High bond rates restrict long term growth. Even if the FED buys long bonds to keep 30 year rates artificially low, that alone will intensify already-hot inflation. I don't see a lot of play here for Bernacke. He's made a deal with the devil to keep rates low (avoid recession at all costs). His only tool for that is easy credit. We're going down a road where, at some point, the general public will wake up to the fact their dollars are rapidly inflating away and demand wage hikes to compensate. At that point, the jig is up. More credit will just cause irreparable damage to the economy (think dousing a fire with gas). This whole era of easy credit demands a clueless public. Thats the only way conjured dollars benefit the Government and its cronies (Gov spends the wealth of its citizens through currency debasement). The media is waking up and reporting inflation. Its only a matter of time before the lemmings act and the other shoe drops.
So whats the play? Long commodities & cheap agriculture. Its the Jimmy Rogers trade. Get with it folks. As for Volker, he didn't have a choice. Thats what happens when cheap credit meets wage inflation. Destroy the economy and its accumulated wealth a la present-day Zimbabwe. Or jack rates and clean it out. Thats the road we're headed down, folks.
This is why I don't watch the news ( I read, selectively - instead ). I thought journalists were there to *report* the news, not spread *propaganda* (what you should think) ... Look at 9/10 messages here - inflation inflation inflation. This is a transition to a deflationary environment. Look at every stock chart - fund outflows. Where is that $$$ going? bonds? no. commodities, yes!! Hot money peaks and goes somewhere else. Look at any stock chart right now, and superimpose that going forward on commodities (but with a longer time stretch). Then we'll have y/y 'deflation' by these guy's measures. Sorry, but these news anchors are 'average joe'; this level of crying means one thing: we're nearing a cyclical top in commodities (but who knows, it may be 6 months from now). They'll all buy gold at $1000+ and then bitch 3 years lately why its the worst investment, having lost half its value. Just because Bernanke's hands are tied and may have questionable methods (the home proposal today cracked me up, but more for the moral dilemma it poses ... he certainly is not an ethicist. Regardless he's looking at the net financial result, and that does make sense - taxes achieve something similar, but with less active resentment from society), doesn't mean we are all better and more brilliant economists than he is.
blah blah blah...if the democrat party wins this election we will be told that everything is turning around and all that glitters is gold...Look around you, do you see a recession because I don't
Money supply isn't fixed. It grows (very rapidly, incidentally). That means hot money doesn't necessarily leave a wake of deflated assets when it shifts into the next bubble. Housing dropped ~16% from its '06 highs. Thats still 37% HIGHER than 2001 prices!! Where will prices bottom? Right where they should be if it weren't for Greenspans credit bubble. This correction to fair value is not deflation. Its a correction to normal price levels. Deflationary fear-mongering is as credible as hyper-inflation. We are nowhere near both. Bernacke is a dildo and if you want to start comparing charts, put up the EURUSD versus Gold or DOW. The economy has been treading water for a long time. The liquidity trap is a concern. But what do you expect when your patron Saints blow massive money bubbles then walk away? One last point. Surprised you missed it. Everyone is saying inflation because Bernacke will do everything to keep us out of a deflationary recession. Bernacke is an unapologetic money printer. Volker, he is not. Connect the dots.