Because of Greenspan's hyperliquidity experiments in the late 90's...it is unclear that merely slowing the bubble growth in the US economy will effectively stop the inflation...
There is no doubt the economy is slowing... But if the FED holds back on rate hikes, foreign investors could seek opportunities elsewhere...like the Euro...which is still raising rates.
And the geopolitical mess that the US is in could start to bite again as more and more money is poured into middle east conflicts that seemingly are unwinnable.
This period is very similar to the latter days of LBJs term when both the War on Poverty and on Vietnam were raging at the same time.
In the case of Dubya it's a War for Poverty however! As the K-Street Kongress has been cutting taxes and doling out pork with reckless abandon...!
The FED is not out of the woods by any means... My hunch is that after Labor Day a more sober analysis will take hold and many will see the true nature of America's structural marco-economic problems.
Still as long as liquidity stays in the markets....Wall Street can happily trade on the "daily data points" without any need for "big picture thinking."
The end of summer and the beginning of the election season in ernest COULD cause a more serious appraisal of conditions to take hold... And a really punk jobs number this Friday could be the first of many "focusing events." Presently the Street has been able to make it's own gravy everyday and spin the news into rally bait almost at will.
The first chill air of September may change that...
