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Author: imdajunkman Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35932  
Subject: Re: Newsweek on inflation Date: 6/22/2006 12:39 PM
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The article concludes with this sentence:

"It's time for the punch bowl to go."

I think the article does a poor job of identifying the present causes of increasing inflation (the chief of which I see to be public and private deficit spending), and it places entirely too much emphasis on the Fed (and its limited tools) as the cure.

One possible counter-measure to inflation would be for the Congress to run a balanced budget, spending no more than actual incomes permitted. Another counter-measure to inflation would be to back away from the increased militarization of this country and its foreign follies, which have mostly served to escalate the price of oil which is one of the chief components of inflation.

The Fed's tinkering with interest rates amounts to the tail wagging the dog. Violent wiggles, i.e., very high rates, will have an effect. But the better strategy is to put the dog of spending on a very short leash. But the will to do so isn't there. So the Fed will hike, and the economy will fold, and everyone will blame everyone but themselves.

Not a happy situation.


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