Friday, June 30, 2006

Forgive the Fed, it knows not what it does

So, the village idiots at The Fed have hiked rates another quarter-point because they are afraid of inflation. Once again The Bernanke Bunch shows it hasn't a clue.

There are two, supposedly inflationary items in the present economy: housing and energy. Housing is already coming back to Earth, partly due to rate increases and partly due to everyone but Bush Buddies being priced out of the market (It hasn't slowed here in SLC, though, although with every other market in the Rockies decelerating, the time is coming.). On the other point, increased energy costs aren't inflationary, people. Sure, prices go up and oil wildcatters have a hayday, but the economy as a hole ends up contracting. Happened in 1974, 1979, and 1991, and it will happen again.

This economy is already starting to strip its gears. No rate hikes needed. The problem is that The Fed's actions always take time to take effect. It took a couple of years for the rate hikes to have an effect, and it will take a couple of years for stopping the rate hikes to take effect. Stop too late, and the Titanic hits the iceberg. How many of you think The Bernanke Bunch has sufficient vision to see all that ice on the horizon?


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