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camberiu · 02-06-2008, 02:32 PM

An overly aggressive rate-easing campaign by the Federal Reserve would only fuel higher inflation down the road, Philadelphia Fed President Charles Plosser said Wednesday.

LINK

brewer12345 · 02-06-2008, 02:33 PM

*Snore*

You really pay attention to this? This is a classic fed move: while you are slashing rates like a Freddy Krueger movie, have some of the fed presidents and governors run around making speeches about inflation so people don't think we are getting too dovish.

Notmuchlonger · 02-06-2008, 02:36 PM

So whats the solution do nothing? Then they will be accused of doing nothing while the economy tanks and takes forever to rebound.

camberiu · 02-06-2008, 02:39 PM

I think they should be raising rates, actually.

Notmuchlonger · 02-06-2008, 02:40 PM

Quote:

Originally Posted by camberiu

I think they should be raising rates, actually.

You think inflation is that bad?

camberiu · 02-06-2008, 02:49 PM

Quote:

Originally Posted by Notmuchlonger

You think inflation is that bad?

Yes I do. However, I must disclose that I was born and raised in Brazil, which suffered from chronic hyper-inflation during the 80s, so I am more sensitive towards inflation risks than most Americans. However, the fact that the great leader is pushing a 3 trillion dollar budget scares me a lot. It was out of control government spending that brought hyper-inflation to Brazil.

dex · 02-06-2008, 03:01 PM

Quote:

Originally Posted by camberiu

Yes I do. However, I must disclose that I was born and raised in Brazil, which suffered from chronic hyper-inflation during the 80s, so I am more sensitive towards inflation risks than most Americans. However, the fact that the great leader is pushing a 3 trillion dollar budget scares me a lot. It was out of control government spending that brought hyper-inflation to Brazil.

I would have to agree with you.

Hyper-inflation is the worst for everyone - rich, middle, and poor - unless you can move your assets to another currency/country. All your savings become worhtless. The only ones who can come out better are debtors. Their debts are inflated away.

Even a depression is better than hyper-inflation. In the USA during the Great Depression unemployment was about 25% at its hight. Or another way of thinking about it is that 75% had jobs.

I think Nixon put in price controls when inflation was at about 4% - aren't we near 3%

eridanus · 02-06-2008, 03:18 PM

Quote:

Originally Posted by dex

I think Nixon put in price controls when inflation was at about 4% - aren't we near 3%

Yes, if you exclude food and fuel.

Vincenzo Corleone · 02-06-2008, 07:46 PM

Quote:

Originally Posted by camberiu

Yes I do. However, I must disclose that I was born and raised in Brazil, which suffered from chronic hyper-inflation during the 80s, so I am more sensitive towards inflation risks than most Americans. However, the fact that the great leader is pushing a 3 trillion dollar budget scares me a lot. It was out of control government spending that brought hyper-inflation to Brazil.

I was too young at the time to care, but we had bad inflation (bad by U.S. standards) back during the Ford and Carter administrations. Paul Volker, fed chairman at the time, raised interest rates pretty high (I think they got up to something like 20%). Caused a lot of pain, but that did the trick to bring inflation back to acceptable levels. From what I've read, what Volker did took a lot of courage - he was getting yelled at by everybody because credit was so expensive and the stock market was not doing well. But now he's lauded for having taken painful but necessary action to beat back inflation. Too bad people blamed Carter.

I think Bernanke is too dovish to do something like what Volker did. Of course, at this point in time, inflation isn't as bad as it was then.