THE FED HAS TAKEN THE "INFLATION CURE" AS THE MEANS OF TURNING AROUND THE US ECONOMY...
IT HOPES THE INFLATION WILL BE IN ASSETS...PAPER ASSETS LIKE STOCKS AND BONDS...BUT ALSO IN REAL ESTATE AND OTHER HARD ASSETS....
PROVIDED HOWEVER, THAT GOLD AND OIL CAN NOT BE ALLOWED TO INFLATE AS A "HARD ASSET"....
THIS IS REALLY THE NUB OF THE ISSUE...
IT GETS DOWN TO "TARGETED INFLATION".... CAN THE FED AND TREASURY ACTUALLY TARGET WHICH ASSETS ARE ALLOWED TO INFLATE...AND WHICH ARE NOT...
SOONER OR LATER THE "BAD STUFF"...OIL AND GOLD...WILL START TO SEEM CHEAP RELATIVE TO SAY...STOCKS....
THEN MONEY WILL FLOCK TO OIL AND GOLD...AS HAPPEN LAST SUMMER BEFORE THE COLLAPSE...
RATIONAL ECONOMISTS...AND MARKET BEARS...SAY THAT TARGETED INFLATION IS NOT POSSIBLE...
EVEN IF THE FED DID "SEED" THE INFLATION IN THE MAJOR INVESTMENT BANKS...AND OTHER "FINANCIALS"......EXPRESSLY FOR THE RE-FLATION TRADE IN STOCK VALUES AND HOME PRICES...
HENCE THE BIG RUN UP IN "BANK STOCKS"...WHICH ARE REALLY WORTHLESS PAPER AT THIS POINT. UNLESS UNCLE SAM MAKES THE WORLD'S BIGGEST "GIFT" TO THE BANKS COMMON SHAREHOLDERS...
BUT THE PENNY PLUNGERS ARE "FOLLOWING THE MONEY," EVEN IF IT TURNS OUT TO BE "RAT POISON" FOR COMMON SHAREHOLDERS!
THE PROBLEM IS KEEPING THAT "NEW MONEY" FROM SLOSHING OUT OF THE BANKS AND INTO THE "BAD PARTS" OF THE REAL ECONOMY...LIKE OIL AND GOLD AND OTHER COMMODITIES....
RIGHT NOW THE MONEY IS TRAPPED IN THE BANKS...BECAUSE OF THE COLLAPSE OF SECURITIZTION MARKETS FOR "BAD" DEBT...
SO THESE COMPLAINS ABOUT "BANKS NOT LENDING" COULD BE TOTALLY FALSE...
IF ANYTHING THE FED WOULD WANT THE MONEY TO STAY IN THE BIG BANKS TO INFLATE THE "GOOD ASSETS" LIKE STOCKS AND BONDS...AND STARVE THE "BAD ASSETS" LIKE GOLD, OIL AND COMMODITIES...
GEE...I WONDER IF THE GERMAN "HYPER-INFLATION" WIEMAR BANKERS THOUGHT OF THIS IDEA...?
