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BAILOUT!: The Fed Caves to Pressure from White House and US Financial Markets
The Fed announced Tuesday that it was reducing its target for the federal funds rate, the interest that banks charge each other, from 5.25 percent to 4.75 percent.
In addition to cutting the federal funds rate by a half point, the central bank also reduced its discount rate, the interest it charges in making direct loans to banks, by a half-point as well.
Former Federal Reserve Chairman Alan Greenspan has sharply criticized President George W. Bush's administration and Republican congressional leaders for putting political imperatives ahead of sound economic policies.
Bernanke and the Fed just proved to the rest of the world they are NOT serious about addressing the problem of the US Dollar. If the US and the Fed will not address the problem, the world will address the problem to the detriment of the United States.
http://cid-yama.livejournal.com/38614.html
Marc Faber on Bloomberg today said a rate cut would be "suicidal" and "you cannot cure a condition by the same thing that caused it".
Are we looking at hyper-inflation? What kind of time frame?
Hyperinflation - Wikipedia
Inflation 1923-24: A German woman feeding a stove with currency notes, which burn longer than the amount of firewood they can buy.
http://en.wikipedia.org/wiki/Hyperinflation
No, we are not.
The Fed continues its gutting of the US economy according to plan, but inflation is not the way to do it. And as Mish explained earlier this week in Is the U.S. printing money like mad?, the printing presses are not anywhere near full speed.
The M3 increase comes from keystroke created money, not printing presses. Much of it will soon be gone, through losses in home values, stocks and derivatives. And you can't have inflation while most of the money vanishes from your economy, let alone hyperinflation.
The rate cut will further devalue the dollar, but the Fed will not make up the difference. The average American will simply have less money to spend.
We will have deflation.
End Game: Hyperinflation
by Robert Blumen
I previously contributed to this debate with an editorial on the so-called Dollar Short Squeeze theory. In the current piece, I will take on what I consider a few of the errors and more questionable arguments that have been appearing from the deflation side.
http://www.lewrockwell.com/blumen/blumen6.html
We will have deflation to the extent that lowering stock and home values and credit defaults cause the money supply to shrink as money essentially disappears from the economy.
BUT, we will have inflation to the extent that governments attempt to print their way out of the mess we're in AND as declining primary energy causes a contraction of the producible goods and services in relation to a given supply of money.
I think in this case the irresistible force of inflation will win out over the immovable object of defaults and declining market values.
Its a bit funny in a sense. The timing of peak oil and rate of decline will determine when peak oil destroys our economy. The financial games joust to either destroy us with hyper-inflation or deflations are just plain broke no matter how you denominate it. And global warming threatens both oil supply and crops with the population straining all resources.
Maybe I'm a nut and I hope some of our writings survive since I think historians will find the battle over how the oil economy ended funny.
We are toast but is it burnt toast and are we going to land butter side up ?