Mish's Global Economic Trend Analysis |
Posted: 18 Sep 2010 04:17 PM PDT Here is an email from Robert who is wondering about the Fed's ability to inflate, and the consequences if they try. Robert writes ... Hello Mish,Fed's Primary Mission Failed Hello Robert First off, congratulations for understanding the Fed's attempt at producing inflation has failed. Many do not see it that way, but it depends on the definition of inflation, and an understanding of what the Fed is really attempting to do. The Fed's primary goal is not to get prices to rise (regardless of what they say), but rather to get banks lending, consumers spending, and businesses hiring. The Fed and Congress have failed on all three scores. One Sided Policies The Fed did not produce inflation, but there is a huge price to pay to pay for the Fed's One sided policies.
One needs to look at things not just from the recent "stabilization" of banks, but as an ongoing affair that has killed the middle class. Inflation was running rampant (in terms of credit in general and mortgage lending in particular). Wages did not keep up with prices and people plowed into assets as a means of savings. The bailouts did not produce inflation, but the middle class bailed out the banks and got nothing in return but higher taxes, fewer services, and looking ahead, years of stagnation. Moreover, the bondholders (such as China, Japan, and PIMCO) were made whole, while the homeowners are still mired in debt. Adding to the misery, banks lord it over on homeowners with total nonsense about the morality of walking away. We will all suffer the consequences of these one sided moral-hazard policies for a decade to come. Quantitative easing, bailouts, extend-and-pretend schemes, and the alphabet soup of lending facilities all have very real consequences. Near-term or intermediate-term (a few years out) inflation are not likely in the mix, but the distortions caused by the Fed and Congress will still affect us for a decade to come. Those distortions (caused by one-sided policies that favor banks and the wealthy) have killed and will continue to kill the middle class. Robert, that is what you sensed, even if you could not put your finger on it. Those who missed it should read Myths About "What's Economically Important" for a discussion about how and why credit, not prices is the key to the mess we are in. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 18 Sep 2010 02:24 AM PDT The Star-Telegram reports Fort Worth pension bubble will blow up in our faces. To understand why Fort Worth's pension system is such a financial disaster, look at one month's list of recent retirements.This is what it always comes down to: corrupt politicians pandering to public unions to win votes for reelection. Moreover, the result is always the same, greedy public unions wanting to raise taxes to pay for their exorbitant wages and benefits. Fort Worth is now bankrupt. The only solution is to fire the city manager, declare bankruptcy, and resolve the issue of benefits in court. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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