This argument has been going on for years. Its the chicken or the egg. At the end of the day do you really like chicken for dinner or eggs for breakfast.
You've already said two things which are totally wrong. Suggest you bone up on economics before posting again. Putting you on IGNORE... no offense, but you apparently have nothing of value to say.
Quote from 5yrtrader: A little inflation is a very good thing, which is what the Fed and most central banks target. Deflation is an extremely bad thing for a market economy, people will put off purchasing goods/services and the gears will slow or halt. -------------------------------------------------- Inflation was great for the housing market for over 50 years, till it corrected. If you don't know that you have to be either illiterate or born yesterday.
Have u forgotten the most recent housing bubble? If u have, then I suggest u take a minute or two to read what Greenspan wrote prior to the collapse, or watch his testimonies. Then go to mises.org and read the archived articles during the same period. The FED's policies are created to help their owners (think, Goldman Sachs, Citi, JPM)
I don't wish to interfere in your discussion, but, with all due respect, you think it's wise to just ignore people who happen to disagree with you? I have always been taught that, as a trader, one should cherish the opportunity to talk to people with opposing views, but, then again, that's just me...
Just because there are assets bubbles, which admittedly were missed by the Fed and were helped to inflate by the Feds policies does not mean that a little inflation is a bad thing. There are other factors that caused the housing bubble other than a low Fed Funds rate. There were assets bubbles before the Fed existed and there will be assets bubbles in the future. In my opinion the period from 1913 to now has been one of the best times economically the world has ever seen. This is not due entirely to the modern Federal Reserve system, but it definitely helped, because the Fed helps to smooth out business cycles, but not do away with them completely. There have been good times and bad times, but taken as a whole the system has been great for the majority of Americans when taken as a whole. 5yr
The low Fed Funds rate was only there between 2001 and 2004. After that Fed Funds was raised until that rate and long-term rates were almost the same: we had a flat yield curve. That was because China was buying up a lot of the long-term stuff, and even bought some mortgage-backed stuff from Fannie & Freddie. That was way more important fuel for the bubble, because those low long-term rates were what kept the bubble going far longer than would otherwise have been the case. This link is to a chart of the 13 week vs the 10 year Treasury from 2001 to the present: 13 week vs 10 year. Notice, if you move your mouse over some periods in 2006, the 13 week actually had a higher rate than the 10 year, meaning the curve was inverted during that time. The Fed was actually trying to bring the bubble under control in that period. But the fervent buying coming from China, Japan, India, and other Asian central banks nullified what the Fed was trying to do. Notice no one on threads like this ever points that out; it would kill their whole conspiracy theory. For one of these conspiracy buffs to suggest that Martinghoul, of all people, needs to bone up on economics has to be one of the most ridiculous things I've ever read on this site, and that's saying a lot. But the author of that statement's name says it all.