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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: bart13 who wrote (74187)11/16/2006 3:27:26 AM
From: mishedlo  Read Replies (2) of 110194
 
I disagree with Hussman frequently even though I agree with him more often than not. My last big disagreement was a few months ago on the huge difference between the intermediate and final PPI. He thought it was showing pent up inflationary pressures but I thought and posted on it several times that it showed inability to pass on costs and thus the final PPI was headed lower. Maybe I was lucky but my scenario played out not his.

He also has some unique views on inflation. But when it comes to the Fed, I agree with him that the Fed is not in control. In fact I wan wondering if that is why Bernanke does not want to pay attention to M3 (unlike Trichet) because he can not do much about it.

As you suggest the Fed is not powerless, but they sure as hell are not on control. If deflation was so easy to fight Japan would not have been struggling with it for 20 years. If consumers decide to stop borrowing the Fed can not force them to. If businesses decide to stop borrowing the Fed can not force that either. Finally the Fed can not create jobs. I can not think of any job creating activity that will replace the housing bubble if the Fed attempts to inflate once again.

Mish
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