From our international banker this morning:
The U.S. economy may yet slip into recession, but inflation is an even bigger risk given the “exceptionally” stimulative stance of monetary policy, Richmond Federal Reserve President Jeffrey Lacker said on Tuesday. Lacker pointed out that when adjusted for inflation, the federal funds rate for overnight lending, currently at 2%, is at its lowest level in post-war history [with inflation at 5%, real overnight rates are at -3%].
It would be so convenient if this were true – it would let the oil companies and the speculators and the credit markets off the hook. It would also let BushCo slide for the trillion-plus dollar debt it’s run up over the last 7½ years that has put the dollar in the toilet.
Just tie inflation and the slowdown in the U.S. economy to all those deadbeats who failed to pay their mortgages, crushing not only the housing market but the construction sector as well, so that the Fed had to step in and lower rates, and everybody else gets off scot free.
Yes, we are seeing inflation – and it is tied not to the Fed’s dollar policy but to the U.S. becoming the largest debtor the world has ever known, with a currency that is approaching pariah status. No one wants our dollars, and it won’t be long before they don’t want to buy our bonds, either.
Yes, we are seeing inflation – and it is tied not to the Fed’s dollar policy but to the U.S. bailing out the likes of Bear Stearns, Fannie Mae and Freddie Mac, putting us further into debt and devaluing the dollar even more.
Yes, we are seeing inflation – and it is tied not to the Fed’s dollar policy but to trade policies that assure we manufacture no sale-able goods in this country, torpedoing our balance of trade (further weakening the dollar) and crushing the middle class’s purchasing power so that more of us have to depend on credit to pay for the goods and services we need, driving up the cost of borrowing.
Yes, we are seeing inflation – and it is tied not to the Fed’s dollar policy but to oil prices which have risen more than 520% (at the barrel) since BushCo took office, affecting the prices of all goods and services that employ any form of transportation in their delivery, and effecting food prices most of all.
But conveniently, food and energy prices aren’t included when the Fed calculates core inflation rates.
It’s a neat sleight-of-hand trick, but the question is: will we be fooled again?
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