Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (13831)	10/21/2004 8:03:31 PM
From: CalculatedRisk	Read Replies (1) of 116555

From that article: The Fed's credibility must be maintained, Bernanke said. "Maintaining the public's confidence in its policies should thus be among the central bank's highest priorities," he said. That comment is why I am in the deflation camp. Both inflation and deflation are possible outcomes, but it depends on the FED. If the FED starts behaving responsibly, I believe deflation is likely (especially if we slip into a recession next year). A "crackup boom" / high inflation is only likely if the FED goes crazy from THIS POINT forward. The FED doesn't deserve all of the blame for the current situation. Since we have had poor fiscal policies for almost 4 years (poorly structured to stimulate the economy), the FED has felt the need to hold interest rates at emergency levels since the middle of 2001. This has led to incredible imbalances that are especially evident in Real Estate and consumer indebtedness - leading to rising bankruptcies. I still believe (call me an optimist) that if we change our fiscal policies, we can avoid a serious economic problem.

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