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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: Peace who wrote (28874)	9/1/2000 8:08:59 PM
From: Perspective	Read Replies (2) of 42787

People are making the implicit assumption here that a slowing economy means dampening inflationary pressures. I would remind you that the Fed responds not to economic growth, but rather inflation. I DO NOT see inflationary pressures abating, I see them accelerating. Look around you. Look at wages, look at real estate, look at energy. I know everyone has been coached to throw them out, but when people make salary demands, they certainly roll them in. Just as we saw strong economic growth with little inflation, we can also have weakening economic growth with accelerating inflation. Just ask the Europeans. By the way, it has happened before; it's called "stagflation", and it made for a lousy decade the last time it rolled around. It's actually what happens if the economy runs undamped by the Fed. Much like the lag between the Fed's actions and the economic outcome, there is a lag between money creation and resultant inflation. By the time the inflation shows up, the money supply has been in the danger zone for months. BC

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