Everyone Catches on to Inflation

Apparently, the world is catching on to the inflation problem that has been coming about for the past 2 years. The Fed is finally starting to speak about inflation pressures and about hiking rates to curb inflation, with a bit of denial about the effects of almost a year of rate cuts, including a short term of very rapid and deep rate cuts.

The G8, discussed the threat to global growth that inflation is representing. This means you can expect a coordinated action from central banks to fight on inflation. You might recall that the G8 made reference to the falling dollar around 4 months ago or so, and look what happened shortly thereafter.

This is a clear hint that you can expect aggressive holds for countries that have neutral or high interest rates and you can expect rate rising campaigns for countries that currently have low rates.

Inflation is a problem that is now going to have to be addressed by all the major countries as food and energy prices are now out of control. While you can blame some of that on speculation, you can also put a share of the blame on the Fed letting the dollar go into the toilet while they “defended the banks”. The rest of the world is catching on now, that as the value of the dollar was pounded, the problems of the United States were exported around the world as things that are normally priced in dollars exploded in cost.

I don’t think that the Fed will be able to continue to drive the dollar into the ground while defending lending institutions that made unsound lending decisions. The manipulation of the free market is going to be greatly interfeared with now that the rest of the world is awake to the fact that they are paying the price for the stupidity of US Banks.

I honestly think the Fed is wising up not because they want to, but because they have to. There is a great risk to the stability of the USD if the Fed continues to turn its back on the USD and sacrafices it as the first choice by tinkering with rates to solve problems. If our rates are really only decided based on economic data that is contained in reports, couldn’t we replace them with a super computer that adjusted rates frequently as data came in? Wouldn’t that idea support a truly free market, as rates would only be set at the appropriate level for current economic data. The machine would be able to adjust in real time as data came in. Just a thought.

I hope that we are heading back into a phase where the Fed does its untimate job of protecting the value of the US currency at all cost. I do believe the days of the US Dollar being the reserve currency of the world are coming to an end. However, that doesn’t mean that it should be thrown away (in favor of the Amero). Hopefully, we can see some of our American purchasing power return and at least a HINT of free markets. If not, there is always Canada!