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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: yard_man who wrote (63997)6/19/2006 12:22:47 PM
From: gregor_us  Read Replies (1) of 110194
 
The FED Cannot Fight Inflation By Hiking Interest Rates,

that's my view. The inflation is coming from a weaker dollar, and also from the relentless deficit spending, which means we are floating huge tranches of additional T-Bonds on a continual basis. Finally, their is resources inflation which the FED can do nothing about except intentionally trigger a recession, which would moderate commodity prices. But that's not gonna work because then the USD goes way down in PPP, on such a development.

The FED hiking interest rates much further will merely put both the private and public debt into play. Then you'll have a real haywire event of competing inflationary and deflationary forces.

The FED is in collusion with the executive branch to make it safe for more borrowing and spending. The hawk talk is all to get people to run to their tattered playbooks and get the dollar to tick up and T-Bonds to tick up. Fighting inflation now, the old-fashioned way, can only be done by a strong signal from Washington that it will cease and desist from the wanton over-spending. Only that is dollar supportive.

Anything less is not "fighting inflation" imo.

The FED, if it continues on its current path, will be rewarded with a lower dollar, and a re-pricing of risk of US T-Bonds.

JMHO!

Best,

LP
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