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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: valueminded who wrote (37244)9/15/2005 11:23:01 AM
From: SouthFloridaGuy  Read Replies (2) of 116555
 
The Fed can create stagflation for quite some time. They could theoretically drop the interest rate to 0% tomorrow and create lots of inflation. Stocks would skyrocket and bonds would plummet.

But the problem with the scenario is that in a society financed by debt, continued credit creation is of the utmost importance.

I would rather the Fed invert the curve rather than try to push the long bond up through inflation.

Inflation will simply lower real rates and catalyze another round of speculation.

All this bodes well for oil. The Fed ought to be tightening, get us into a consumer recession NOW while corporate balance sheets are still healthy because this corporations will not layoff people if their businesses are well financed and intact.
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