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Inflation isn't extremely low. The last 2 years was 2.4% and 2.1% (https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usin
by thorwasdfasdf 7y ago
Inflation isn't extremely low. The last 2 years was 2.4% and 2.1% (https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usinflationcalculator.com/inflation/historical-i...). Also, I question the 2% target the Fed is supposedly using.
with so much money in equities and real estate, there is a huge inflation risk ahead of us. Just think what would happen if people actually started to sell off that equity and start spending it (such as those retiring baby boomers).
Furthermore, the fed is supposed to be smoothing out the economic cycles. If it keeps feeding the bull market with lower interest rates, it won't be able to do anything once we hit a recession. The result is much larger booms and much larger recessions: the exact opposite of what the fed is supposed to do.
- UncleOxidant 7y agoMostly agree with your thesis that inflation isn't extremely low, but wouldn't boomers selling off assets (housing, stocks) actually be deflationary not inflationary? They'd be selling the house to pay for longterm care which means they're going into cash.
- thorwasdfasdf 7y agoAsset prices of equities aren't figured into the inflation calculations. So, when equities get sold off, all that money comes flooding into the money supply.
- ianai 7y agoYep, the fed should be removing the punch bowl before the peak of the party. Start a decline in a slow manner as opposed to an eventual panic and crash. Also gives the fed something to do in the future.