Best to be on one's toes...
Absoluletly! I agree there are signs that inflation is creeping, especially in some eco indicators. After looking at a lot of commodity charts, I didn't see a large number of price rises that one would expect to see if commodity based inflation was about to be a big issue going forward. By no means did I check every commodity and the ones I didn't look at could be fueling the inflation fires.....
I used the term phantom because the FED's hard line on interest rates last year was largely based (or blamed) on their worries that run away inflation was waiting in the wings and it must be stamped out before it surfaced. I still have a hard time understanding the position in hindsight. I guess I don't think that minor changes in the rate of inflation is that big of a deal. Trying to keep inflation in a 1.5% range from 1.0 to 2.5% seems like a bit much to ask of the FED (and maybe it's my lack of understanding that gives me this impression).
Allowing for a temporary spike in inflation may be a necessary evil when attempting to 'reinflate' the economy (or investor/consumer confidence). We are seeing gold start to make some noise. This makes sense with many believing that lowering FED funds rates even further at this time will fuel inflationary pressures. This is why I always try to keep one eye on the gold market, it's a great indicator for the winds of change. (On a separate issue and I'm not trying to get the thread off on a political rant but it wouldn't surprise me to see the Republicans in power assist the yellow metal industry to some extent, in a somewhat similar move to reducing environmental pressures on industry in general...) We need to keep in mind the trend is your friend. If gold is starting it's rebound from a 20 year bear market, there could be some serious money to be made. (even if it's only in the short term)
If the foreign markets are selling out of our markets en mass, if our consumer confidence is dropping, if our investment capital decides to dry up and put even more pressure on our stock markets, if recession is spreading from our manufacturing base into our services industry, if Japan falls off of a cliff in a hurry, if the FED slams on the breaks and simultaneously stalls our economic engine, if there's no 24 hr roadside assistance for our troubled markets, if....... |
