I have a sneaking suspicion that the Federal Reserve is planning to put a halt to the Trump stock market rally by raising interest rates and talking endlessly about future increases. There is an uptick in the Consumer Price Index (CPI) in recent months, but that is not enough reason to raise the rates to choke off a rally. Consider two factors: 1. The long term inflation rate is trending down, and trending down sharply in recent years going back to the 1980’s. Reagan and Volcker defeated inflation in the 1980’s. The greater long term threat is now deflation, not inflation. Excessive debt is a long term deflationary factor for individual households, small businesses, large corporations, and nations. If there is too much debt that cannot be serviced, then assets must be sold to pay the debts. Deflation is a real possibility for the United States, not inflation. The Fed quite often fights the last war, with a knee-jerk reaction to the 1970’s and 1980’s, and misses other macro events, such as too much debt. Just check out the commodity prices of the last four or five years. Factor number 2: The Federal Reserve is not some right-wing bastion of conservatism. Federal Reserve Chair Yellen and all the other governors have been nominated by Mr. Obama. Only one other governor that I saw had any connection to a Republican. Partisan politics will play a role in the market.
qcconservative
My conservative opinions to the world.
Tag Archives: Washington
Obama, Syria, and Cynicism
If I was a cynical guy about politics in Washington, I could be convinced that Mr. Obama picked this time to make Syria an issue to avoid the national spotlight about jobs, the economy, Obamacare, the debt ceiling, the IRS, the NSA spying, Benghazi, and who knows what else. Now the President will use more time in September to listen attentively to the discussions in Congress before he acts upon his own decision. We’ll see if Congress helps him out and gives the okay to attack Syria. He has talked himself into a corner without a strategic vision for dealing with Syria and telegraphs his moves. Gas attacks and red lines have existed since 2012; why did he pick this particular time? Conventional wisdom says we have to do something because of the horrific images of children killed by a gas attack. I contend that all images of war are horrific, regardless of the ages of the people killed. Mr. President, residents of the Middle East have been killing each other for thousands of years over race, religion and ethnicity. A few stray Tomahawk missiles will not solve a thing. Those Tomahawk missiles will, in fact, make us weaker because of the international scorn and loss of trust. If I was a cynical guy, I would not believe that your military tactics are as pure as the wind-driven snow. Are these the actions-to-come that earned you the Nobel Peace Prize?
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