Maybe Greenspan will lower rates even more to compensate and make everything affordable again.
If demand falls and jobs slow and housing stalls, book it.
Demand will fall with rising prices (unless wages rise enough to compensate), that is guaranteed.
Now, the question is will demand fall if prices just sit? Have we reached some sort of equilibrium here? This depends on jobs, wages, and housing. Those are THE absolute three most important factors in this economy, not the price of copper, gold, oil, and soybeans.
Like it or not those are the factors cited by the FED for at least 4 months now. You either believe it or not. If Russ was in charge, interest rates would immediately be raised 2 points over several months, housing would plumment, jobs would plummet, and IF Russ was lucky, the price of oil would drop. Perhaps it would not due to a "problem" in Saudi Arabia or Iraq or venezuela or perhaps China still sucks it up. To cure inflation in oil, perhaps Russ bumps up interest rates another point. At that point our economy would be so F*d up that who knows where the price of gold would be? Anywhere from $300 to $600 would be fair game. No doubt prices of houses and equities would collapse on that and demand for copper in the US would fall off the cliff.
Russ Winter would be happy that "inflation" was cured but the world would be in an economic depression. I would send my congradulations to Russ for curing inflation.
Mish |
