Here comes the inflation!

[Mega]

http://business.timesonline.co.uk/to...cle6830542.ece
Mike

[hayekvindicated]

Re: Here comes the inflation!

Mega,

No. The problem is not inflation but DEFLATION (according to the geniuses in our government and the BOE). Ergo, we need more public spending and "investments into the future" (translation: further addition to the 700,000 worthless government jobs that MacBroon and his party have created since 1997).

In the opposition we have Davy Boy Cameron - good lad, he wants to be known as a "nice" lad. He doesn't want to be called a "nasty Tory". Remember how all Tories who stood for fiscal restraint were considered "nasty"? So Boy Dave must have none of that. Let's jack up the top tax rate to 60 percent and "invest in the future".

Incidentally, Moneyweek has an article showing how EVERYTHING you buy in Britain these days has a 48 PERCENT TAX COMPONENT. This is on top of the 40 percent income tax that is levied on incomes above £35,000 (which is what I call poverty line in London).

Britain hasn't a hope in HELL of balancing the books. The currency will be in the toilet within half a decade.

[blazespinnaker]

Re: Here comes the inflation!

Deflation .. maybe if you buy all your goods in AUX. Haven't you been watching the USD crater all week?

Ok, I get it, you're being sarcastic.

I love how the treasury yield is dropping as the same as the USD currency. I just find that ... hilarious.

[unlucky]

Re: Here comes the inflation!

Deflation .. maybe if you buy all your goods in AUX. Haven't you been watching the USD crater all week?

Ok, I get it, you're being sarcastic.

I love how the treasury yield is dropping as the same as the USD currency. I just find that ... hilarious.

Based on the past few months' activity, looks like the markets believe the following three statements are all true:

1. Economies will recover strongly, and soon.
2. Central banks will not raise interest rates.
3. There will be no inflation.

Find the lady... 1, 2, or 3?

[goadam1]

Re: Here comes the inflation!

Deflation .. maybe if you buy all your goods in AUX. Haven't you been watching the USD crater all week?

Ok, I get it, you're being sarcastic.

I love how the treasury yield is dropping as the same as the USD currency. I just find that ... hilarious.

It's called the "fear" trade.

[cjppjc]

Re: Here comes the inflation!

Based on the past few months' activity, looks like the markets believe the following three statements are all true:

1. Economies will recover strongly, and soon.
2. Central banks will not raise interest rates.
3. There will be no inflation.

Find the lady... 1, 2, or 3?

I think all you need to believe is #2.

[unlucky]

Re: Here comes the inflation!

I think all you need to believe is #2.

That's quite possibly true. Free money => "buy anything". Inflation/high interest rates would be bad for stocks and bonds, but after the Great Moderation, who can imagine inflation/high interest rates? Not many, it seems.

I fixed the interest rate on my mortgage a few months back. Everyone thought I was nuts. I previously had a variable rate that was contractually limited to no more than the ECB rate + 0.5%. The mortgage advisor at the bank pleaded with me to stay variable, as the rate was the best ever and these contracts are no longer available. My friends advised me not to second-guess the bank, as "they have this stuff all figured out, you can't win by betting they're wrong". I stuck to my guns and fixed the rate at just over 4% (a rate I know I can afford). Shortly afterwards, all the banks here increased their long term fixed rates. "Decision forced by market developments, hopefully short-term, deeply apologetic, hope to get back with the government programme soon, etc, etc".

[cjppjc]

Re: Here comes the inflation!

My friends advised me not to second-guess the bank, as "they have this stuff all figured out

Is there a quote hall of fame?

[GRG55]

Re: Here comes the inflation!

It's called the "fear" trade.

Actually it's called "Credit Easing"...and it comes courtesy of your friendly local Fed...

From the Chairman himself [from a lecture given at the London School of Economics on January 13, 2009]:

...The Committee is also evaluating the possibility of purchasing longer-term Treasury securities. In determining whether to proceed with such purchases, the Committee will focus on their potential to improve conditions in private credit markets, such as mortgage markets.

These three sets of policy tools--lending to financial institutions, providing liquidity directly to key credit markets, and buying longer-term securities--have the common feature that each represents a use of the asset side of the Fed's balance sheet, that is, they all involve lending or the purchase of securities. The virtue of these policies in the current context is that they allow the Federal Reserve to continue to push down interest rates and ease credit conditions in a range of markets, despite the fact that the federal funds rate is close to its zero lower bound...