Alex/Darlene: The old argument inflation/deflation.
On the one hand there is no doubt about monetary inflation which directly affects the equity markets, but the deflationary pressures from the commodities sector (energy, mining, wood products etc.) and the more recent imported deflation from Asia seems to balance itself out. Paul Ross's recent post about money supply led him to the conclusion that eventually inflation will filter down to the Consumer Price Index. This is of course what the Feds are fussing over as well. In reading some of the speeches by various Fed. Reserve individuals, they admit to lucky circumstances which have balanced the inflation/deflation numbers. As long as commodities stay depressed, CPI inflation will probably not be a problem. But in my view, the equity and money markets which have benefited from the Feds monetary policy are extremely vulnerable to any sign of inflation, which will inevitably occur. But for now, for most people, these are the best of times, the Dow is up, the dollar is strong, no inflation/deflation and employment is up. The President is doing a great job!
Phil |
