Are they serious? The US Federal Reserve yesterday took significant action to promote lending and restore growth to the US economy. The Federal Reserve cited the following reason for the dramatic action:
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession.
Inflation will be an issue in the USA when it actually starts growing instead of contracting. Read the above statement from the Federal Reserve, does this seem like growth is around the corner? If growth is so close, then why has the Federal Reserve taken made such a bold move? I think that Deflation is the real concern here. Remember that we can stop inflation; Deflation is the real scary one, especially since the Federal Reserve has already thrown the kitchen sink at the problem. It is funny how the stock market always seems to be so ahead of the news without actually thinking about the now. It is true, low rates makes growth easier because of the cheaper cost of money, but to get to the ending you have read the whole book.
Annual inflation rates in the United States from 1666 to 2004
Tags: deflation, economy, federal reserve, inflation, invest, investment, US, USA
