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Paul Gabrail is an investor who prefers to focus on the realistic aspects of the economy. Paul is never hesitant to offer his oftentimes unique perspective on all matters related to the economy, real estate and personal finance. He co-founded Select Investment Group, a real estate investment... More
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The Capitalist Manifesto
  • The Fed's Secret Desire To Inflate The Heck Out Of Our Country

    Anyone who believes that the Fed wants to keep rates low until unemployment goes below 6.5% or as long as inflation stays below 2.5% is kidding themselves. I have written about this in the past and I have to repeat it again. I don't hear many people talking about the inflation risk coming from the money being printed like crazy by the Fed. The Fed talks about how they want inflation kept low but it's the biggest crock of bologna.

    Printing money causes inflation. Why? More money in the economy means people can spend more and bid up prices of goods and services which cause wages to go up and other goods and services to go up in price, etc…that's inflation.

    Is inflation bad? Absolutely not. I have always said, as a real estate owner, I would love to have consistent 4-5% inflation each year. I would make a killing, as would everyone who owns a home or any other real estate assets. Why? Well, when you buy an asset with a fixed mortgage, as the asset goes up in value and as your income goes up, you are still paying the bank/creditor back at the same amount each month, no matter how much the asset is worth or how much you make. So if your mortgage today is $1,000 per month, and you are on a 30 year fixed mortgage, your mortgage is $1,000 a month in year 20 and your income may have doubled!

    So what does that have to do with the Fed? Well…think about it. All the Fed is doing when they "print money" is increasing our debt load and just like any debtor, they hope inflation kicks in and GDP (our income) goes up with inflation. Then they will be paying their low interest debt that they are incurring now with future inflated dollars.

    I hope that makes sense because not only does the Fed want inflation…we should all want inflation to help us get out of this financial mess in the future. I won't even get into how that won't be possible without sacrificing growth now and for the forseeable future

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: economy
    Apr 07 5:17 AM | Link | 1 Comment
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