Tuesday, 23 June 2009

Inflation Vs. Unemployment



I don't know Michael Pento's work, but he makes some interesting points. I don't agree with him on his inflation theory. My belief lies in the fact that credit is contracting faster than the Federal Reserve can print it's fiat paper money. He is right that the Fed is going to do whatever they can to avoid a depression (although inevitable), and that means keeping the Fed funds rate low (possibly for our lifetimes, like he said). It also means coming right out and saying they are going to buy treasuries. Basically trying to prop up that market themselves. The belief that the Fed is all powerful is going to be tested. The Fed thinks its all powerful, and wants to give the perception of omniscience. But it is clearly scared to death that the market will realize what they are doing and collapse the system. These are perilous financial times.

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