Hello EP, I do not believe Bernanke or any FED can keep up the fight against inflation, because (i) he does not understand inflation, as indicated by his belief that inflation can be targeted, (ii) the FED's job is to inflate, and it has done a great job, and (iii) the weight of history is against such a read.
Should Bernanke keep raising FED rate, in the coming days of rage, he would need 24-hour protection from the electorates, is my guess.
The politicians want inflation to win. The electorates desire to lose to inflation; besides, inflation is already winning; only the body bags are flown in at night, and the casualties are hidden from view.
I think the idea of the FED being very tough on inflation is a non-starter, for we got here by the machinations of the FED and its policy of inflation.
No, history be my guide, we will inflate then die, or die right now.
I read Mauldin regularly, just and only for a view.
Mauldin is wrong, because he started by actually believing the employment numbers, and from that point on he is lost.
His brand of wishy washy "if this then muddle through and if that then muddle through again" style of analysis works most of the time because most of the time nothing dramatic happens, but not at inflection points.
The FED will of course have to keep talking tough, and those periods of panicked belief by the market would be times of max opportunity.
Liquidity will be plentiful when needed most (for that is the FED's job), and the short term FED cost will mostly be affordable, because, as Bernanke noted, the marginal cost of helicoptering money is next to zero.
Inflation is the rule, and the fight against inflation is the exception.
Chugs, J |
