<I'm not sure whether the FED bias will change to neutral.>
I don't see any other option Jim. A policy of tightening interest rates would lead to financial chaos for other nations first and subsequently us.
At first, tightening of interest rates would benefit our economy. We've got our low fixed rate mortgages and we'll be paying them off with inflated dollars, leaving us more money to spend on SUVs, high tech, fashion, vacations, dining out, entertainment, etc. Money circulating is good, and some will get richer, but there will be an increasing amount of people dropping out of the circle as the rest of the world is not able to afford our products.
The current market crises may not be due to the question regarding current Fed policy, but perhaps it is the uncertainty of the world economic picture. Japan,the leading Asian indicator, for example, continues to offer a lack of consistent evidence that a turnaround has been engineered. Brazil, the leading South American indicator, is still very fragile. The European Common Market is just beginning to struggle with their massive problems.
The Fed's hands are tied, in my opinion.
Sergio |
