dex
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- Joined
- Oct 28, 2003
- Messages
- 5,105
This is a good article - it explains the new Fed plan.
Hussman Funds - Weekly Market Comment: Fed and Treasury - Putting off Hard Choices with Easy Money (and Probable Chaos) - March 23, 2009
The reason we're not seeing inflation here and now is that despite a near doubling in the monetary base, we've seen a buildup in goods inventories combined with a surge in safe-haven demand for government liabilities. So investors have absorbed the increased supply of government liabilities without a collapse in their marginal utility. This will not persist indefinitely, so unfortunately, any nascent economic recovery in the next couple of years will be against the headwinds of both Alt-A mortgage defaults (coming to your neighborhood in 2010), and inflationary pressures as soon as safe haven demand for Treasuries eases back even moderately.
Milton Friedman was mostly right about inflation – inflation may be a monetary phenomenon, but only because governments ultimately can't help but monetize huge amounts of spending (as the Fed is doing now). He was entirely right about fiscal discipline – “the burden of government is not measured by how much it taxes, but by how much it spends.”
Hussman Funds - Weekly Market Comment: Fed and Treasury - Putting off Hard Choices with Easy Money (and Probable Chaos) - March 23, 2009
The reason we're not seeing inflation here and now is that despite a near doubling in the monetary base, we've seen a buildup in goods inventories combined with a surge in safe-haven demand for government liabilities. So investors have absorbed the increased supply of government liabilities without a collapse in their marginal utility. This will not persist indefinitely, so unfortunately, any nascent economic recovery in the next couple of years will be against the headwinds of both Alt-A mortgage defaults (coming to your neighborhood in 2010), and inflationary pressures as soon as safe haven demand for Treasuries eases back even moderately.
Milton Friedman was mostly right about inflation – inflation may be a monetary phenomenon, but only because governments ultimately can't help but monetize huge amounts of spending (as the Fed is doing now). He was entirely right about fiscal discipline – “the burden of government is not measured by how much it taxes, but by how much it spends.”