Tuesday, April 05, 2011
The Fed's Gambit...
...caught between roaring ("transitory") commodity prices and the dismal bank lending activities (recall that Loans create Deposits...in effect banks conjure "money" from nothing when granting a loan and posting required reserves at the Fed level) the Fed is not in an enviable spot.
Bank lending is not improving.
While the rest of the investment world screams inflation, I still hold the contrary position that deflation holds the larger danger, precisely because the lower gears of government are grinding toward austerity measures. This, coupled with the commodity markets sillyness are balance points in my favor. In addition, the geo-political events in the Eastern hemisphere are in my opinion more destabiliziing than what is currently conjectured.