Inflation sparks glowing on the horizon (unemployment at 26 year peak)

[UpInArms]

Source: Reuters

WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke must find a convincing way to explain why his central bank is in no hurry to raise interest rates even though the economy is stabilizing.

With mounting evidence that the recession is loosening its grip on the economy -- even if a healthy recovery is far from assured -- investor focus is shifting to inflation.

The Fed thinks that with unemployment at a 26-year peak and idle factory space at its highest on record, there is little near-term risk of prices overheating. That gives the central bank cover to keep borrowing costs low until it deems the economy strong enough to handle a rate hike.

<snip>

JAPAN OR ZIMBABWE?

Goldman Sachs economist Jan Hatzius said there was so much disagreement among investors about the path of inflation that he has heard forecasts ranging from Japan-style deflation to hyperinflation. His personal view is similar to the Fed's -- there is enough slack in the economy to ward off inflation.

Read more: http://www.reuters.com/article/wtUSInvestingNews/idUSTRE55K20K20090621

[lindisfarne]

1. Krugman is of the opinion the talk about inflation is absolute nonsense.

http://www.nytimes.com/2009/05/29/opinion/29krugman.html

[UpInArms]

3. yeah, it's stabilizing - if you discount food and energy

so I guess you don't eat or have a home to heat or cool or need to transport yourself or your family anywhere -

so, well, I guess since I agree with Krugman about 90 percent of the time - that I'm wrong to think that inflation is something that happens when there is an out of control printing press that is selling the taxpayer and their dollars down the river in a heartbeat

:shrug:

[lindisfarne]

4. Great lines from Krugman: If inflation isn’t a real risk, why all the claims that it is?

All of this raises the question: If inflation isn’t a real risk, why all the claims that it is?

Well, as you may have noticed, economists sometimes disagree. And big disagreements are especially likely in weird times like the present, when many of the normal rules no longer apply.

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

Needless to say, the president should not let himself be bullied. The economy is still in deep trouble and needs continuing help.

Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. But when it comes to inflation, the only thing we have to fear is inflation fear itself.

[UpInArms]

5. if you know what I follow (the dollar) then you know I'm no "scold"

my issue is strictly with the way the monetary policy is shaped and the fact that the Fed has been monetizing the debt

this will lead to greater inflation and there is no way to avoid the eventual distress that this will cause the people who have no other method of trade other than through the dollar (or pennies) in their pockets.

as I said, I agree with Krugman 90 percent of the time.

This is that other time.

:hi:

[lindisfarne]

6. We'll see. I tend to agree with Krugman and he's right more often than most economists.

Most economists are essentially reading tarot cards or pulling it out of their backsides, though.

[DJ13]

2. .........even though the economy is stabilizing.

Maybe the government and the Fed dont really believe it IS "stabilizing" despite the happy face they keep putting out.

PS-
Never.....NEVER..... trust the economists from Goldman Sachs.

They would lie about their own mother to make an extra $.

[Yupster]

7. The government is needing people to lend us

$ 150 billion a month to finance our budget deficit.

How do we find people to loan us $ 150 billion this month? Then how do we do it every month after that?

To me the answer is we'll have to offer higher interest rates. If not next month, then three months from now or six, but it has to happen.

[Psephos]

8. bullseye eom

[CreekDog]

9. you need economic growth first

stabilizing in a hole is not growth.

[RUMMYisFROSTED]

10. Since 1983? That can't be true. Reagan was a saint!

A saint I tell ya.