You're probably not missing anything... it all comes down to different people looking at the same information, coming to different conclusions.
If it's any consolation, the "experts" can't agree.
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Agreed, that monetary stimulus is inflationary - and with so much stimulus, possibly hyperinflationary.
But the Fed has stated that when inflation starts to rear its ugly head, it will begin withdrawing liquidity.
Two issues:
[1] Critics doubt that the Fed can control inflation, i.e., pull enough money out quickly. They say monetary policy as practiced by the Fed won't work.
[2] If substantial money is taken out, won't that have the effect of stalling the economy?
---[The thing is, stimulus was applied to restore credit which dried up when banking froze. When credit is restored, then monetary stimulus can be withdrawn, but the economy will still function. In theory.] <g>
GST posted strongly in favor of a stagflation scenario, and I think the chances are 50/50 that he's right.
OTOH, I just don't see how the US can be competitive at current valuations, never mind pay off massive debt. The standard of living isn't being maintained by earning, and outflows still exceed inflows. If the standard of living IS matched to earning then the standard of living must drop. If it drops, that's a deflationary scenario: falling wages, asset values, while the Fed decreases liquidity.
If it doesn't drop, that means that the US is still living past its means - and sooner or later, the world will stop buying US paper. Then it gets ugly.
Just another opinion <g>
Jim |
