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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (367613)	1/21/2008 11:41:25 AM
From: RetiredNow	Read Replies (1) \| Respond to of 1571591

I guess we'll see which wins out. But I'll tell you what I see. The Fed has successfully unstuck the credit crunch and has flooded the market with liquidity. So that isn't a problem. And now to combat recession and unemployment, they are about to continue lowering rates, and about to spend $150B as a short term shot in the arm. All of these moves are highly inflationary: 1) increased liquidity/money supply 2) continued promised to do rate cuts 3) Fed Gov't promises to legislate increased spending and tax cuts that will not be paid for, and so will increase deficits The last time we had these conditions was in the 70's and that lead to a pretty unpleasant recession. Volcker stamped out inflation by 1982, but it was very unpleasant. We don't have a Volcker. Instead we have a Bernancke that believes in feel-good economics. The bottom line is that all of the steps above are tantamount to borrowing growth from the future in order to feel good today. You can delay the consequences of bad monetary and fiscal policy only for so long. The longer you delay the worse the consequences. If I were Bernancke, I would stand pat on rates and I'd tell Congress not to spend a dime that's not paid for with increased taxes or cuts to other spending. Or better yet, I'd tell them to cut military spending and redirect that spending towards tax rebates to goose the economy. Bringing home the troops from Iraq would save us $120B per year. We could start there.