BarroMetric Views: The Danger to the US Economy

I was was watching a couple of the Fed Presidents on CNBC. It seems to me that unless the US Fed Reserve is very careful, the very thing they are most afraid of will come to pass. Their comments indicated that they are dismissing the risk of high inflation (brought about by the bailout’s huge printing press, ‘quantitative easing’).

It seems to me that given the trillions spent (trillions that the US does not have) inflation will result; the risk is a hyperinflation led deflation UNLESS the FED takes prompt action. 

Casey Research produced an interesting chart in its latest letter. It’s subject to copyright so I won’t reproduce it here. But do visit the site for a gander. You’ll see that according to the Taylor Rule, the Fund Rate ought to be at 4%; the official Fed Fund Rate is below 1%.

This suggests that the Fed is again behind the curve. This crisis  was brought about because of too much money for too long - part of the problem was the Fed Fund Rate was kept too low for too long. It seems the Fed has not learnt much from history and those who fail to learn from history are doomed to repeat it. More’s the pity, the FED will drag us along with its persistent errors.

Refer this blog post to a friend or colleague…