Thursday, January 28, 2010
Looks like tighter money ahead to try to ward off inflation. While the economy is growing now I wonder what will happen if interest rates go up very much? There is still a very weak housing market, foreclosures, and some large percentage of home owners are upside down on their mortgages. I guess it is possible to raise interest rates just enough to ward off inflation but not so much as to push the economy back into recession. But it seems to me that there has been so much liquidity pumped into the system that we will see more inflation than they are hoping for. Much of this inflation has already occurred with the jump in stock prices and the propping up of house prices that have tripled in many areas since 2000 and not come down and have even started to increase again! Also some of this liquidity probably went back to Mexico with departing illegals. More liquidity went off to Iraq, Afghan, brothels and harems with our contractors, and to drug dealers, including Columbia. And of course China is getting a lot of our money legally through foreign trade. I think stagflation is a possibility. Obama seems to be stuck in a far-left trajectory with gays in the military, cap and trade, no clear idea on health care except to change it, a variety of wasteful government spending projects.... He is letting the economy deteriorate and is probably not going to get re-elected. Had he cut taxes then many people could have paid their mortgages, medical bills, auto, credit cards and businesses could be hiring more than firing to cope with the additional demand. Tax cuts are an immediate cash injection into peoples pocket books. Democrats did that successfully in the 1960s, but seem to have forgotten about it nowadays.