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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (239234)	2/26/2010 12:33:44 PM
From: Perspective	Read Replies (4) \| Respond to of 306849

I used to say to those who believed inflation was going to slaughter us - "you may be right, but you need to wait until the Fed is actually taking the extraordinary actions of purchasing garbage securities and monetizing enormous government deficits." Well, now they've done it. And what inflation has it produced? The only things that inflated were the very garbage the Fed purchased. Gee, we got junk bonds and the stock market to jump. Where else has Fed action led to inflation? The dollar was trashed, but it still hasn't led to inflation in the places one would expect to find it. I think it gets at the fact that the only way to produce inflation in the economy is if enough aggregate demand is stimulated through loan production from the banks that it pressures aggregate supply. So far, every dime of borrowed government spending has only served to replace the $0.15 of private sector demand that has been vaporized thanks to the pruning of the credit bubble. There remains no pressure on aggregate supply. The dollar has been trashed, but commodity prices were so heavily influenced by borrowed dollars that they haven't recovered fully either. So I say again, unless and until we see a further increase in debt monetization and Fed asset purchases, inflation will not be the problem. Despite all Ben's best efforts, he still appears to be pushing on the proverbial string. The banking sector is a shambles, and he can do everything he wants to fight the free market forces of deflation. He may have a bladder the size of Lake Superior, but ultimately he's still just taking a whiz in the ocean... `BC