Yo Yo Ben
This entry was posted on 3/19/2008 9:09 AM and is filed under uncategorized.
Rate cuts by the Fed are generally considered to help the economy, but do they? Rate cuts always have the possibility of increasing inflation. This is more true today than at any other time since the late 70’s. Inflation is everywhere. In China it is at an 11 year high of 8.7% and climbing. Russia is up to 12%. Egypt and the middle east are over 12% . Venezuela and Argentina are over 20%. Both oil and food prices are breaking records. A crashing dollar will push inflation. The Fed’s cut in January resulted in higher long term bond yields, as markets became wary of inflation, making the Fed look impotent. The cut also will narrow margins for shaky banks. Large cuts may result later in large raises to stem inflation. The remote deity Greenspan may be replaced by Yo-Yo Bernanke.
