Friday, May 06, 2011

 

What's worse than rising gas prices?

Falling gas prices. In an economy beset by deflation, housing and incomes, you really don't want prices to be falling. That is the purpose of quantitative easing- to buy all the treasury issuance so that the government can spend and try and make up for the loss of income that came from the housing bubble bursting. Of course, there is no chance that this will work. The federal gov't doesn't have enough credit/money to pull this off without risking debasing the currency which will drive prices up squeezing consumers.

If you detect a contradiction in there than you are right. You see they want prices to rise just not all prices. They want home prices to rise. They want wages to rise. Instead they are getting commodity prices to rise. And the stock market which is a good thing, in their minds. (I think the stock market is a giant trap waiting to suck in investors who feel left behind and can't live on the meager interest rates of treasuries and CDs.

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