Sep 30 2005
Losing the Inflation Fight
Jim Jubak at MSNMoney has a decent article stating that he believes that the Fed has already lost the fight on inflation. We would tend to agree with him that the Fed is in a pickle — of its own making, no doubt.
We don’t entirely agree with Jubak, even if his premise is correct. Jubak, like most in the mainstream, fails to give the vast money supply creation and credit bubble its just due. Devastating a country’s savings apparatus and constantly milking wealth out of existing dollar holders is not good. This has happens constantly and has accelerated over the last few years. Directly we are seeing the effects in food and energy and other commodity prices jumping well ahead of formal CPI.
Indirectly, and much more surreptitiously, we have lost a ton of purchasing power given that inflation has — if you can believe it — made Chinese goods more expensive than they’d naturally be.
The bane of any policy maker is that Fed and Government can only do so much. Eventually they get trapped and only compound the previously made mistakes. We are in that phase. But expect the blame to be squarely placed on some other evil entity.
