Tuesday, September 30, 2008

How can we miss...

A severe bout of inflation in the next decade?
The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.   [More]
As I set transfixed watching the market freefall yesterday in North Dakota before a speech, I began to notice what the talking heads were not saying.  Over three hours I did not hear the word "inflation" once.

It is the lesser of several evils now, and I believe virtually assured to devalue the gigantic debt we are creating right now.

4 comments:

O in MN said...

Another word that I haven't heard is "Alan Greenspan" (I know it's a name, but that fits with the article). His cheap money policies of the past are the root of this problem. We cannot borrow our way to prosparity and the government cannot solve this problem.

Anonymous said...

So what will this "severe bout of inflation" do to the price of farmland next year or 5 years from now?

John Phipps said...

o:

I'm not so sure Greenspan s as much at fault as the introduction of unregulated and virtually incomprehensible securities like CDO's. Besides, even if we can find a culprit, I can't see how that will help us climb out of the mess.

anon:

Land (two 100-acre tracts) just sold in the county next to me (Douglas, IL) for over $9000 according to me good friend. I don't see it dropping, but IO do think the days of 5% cash rents could be numbered.

The other factor is the "new" discovery of the safety of farm land. It is never worth nothing - unlike say, Fannie Mae shares.

Thanks for reading.

O in MN said...

I really wasn,t looking for a culprit, its just that it seemed in the past, Greenspan's word was gospel and now we here nothing from him. Everyone thought it was so great that he kept credit easily accessable only to have it fall apart now