As retailers struggle with excess inventory and a tapped out consumer...
there is an inflation-deflation paradox developing.
As retailers panic and lower prices to move old stock...inflation goes down.
But that still doesn't solve the FEDs biggest problem...THE HYPER-LIQUIDITY that Greenspan used to flood the money markets after the Bubble Burst in 2000.
In a sense this hyper-liquidty experiment helped to build China into the industrial powerhouse it is today, as American companies build plant and equipment in China...not to mention building by the Chinese themselves to supplement interational capitals "Flight to Cheap Labor."
AMAZINGLY, THE HYPER-LIQUIDITY INSIDE THE US HAS BEEN CONCENTRATED ON WALL STREET AND IN THE AMERICAN HOUSING MARKETS!
Result:
BUBBLES GALORE IN HOUSING, AND PAPER ASSETS LIKE STOCKS AND BONDS, WITH THE SPECULATION IN COMMODIITES ALSO RAMPANT...eg Oil and Gold.
So has a result the FED is faced with an inflation/deflation paradox... Deflation from China and Inflation inside the US markets.
Retailers will continue to lower prices.
And speculators, who run the global economy now, will continue to speculate... And this is where Greedspan, etal must, alas, remain focused... Namely on the hyper-liquidity speculation that the FED has fostered and encouraged over these many years of "Bubblenomics."
The result could be higher rates even as prices are falling at retailers! Or put another way the PARADOX OF STAGFLATION.
