The Kennel

Fed On the Right Track By Adding Liquidity, Not Cutting Rates

Mr. Kee, Your focus is upon CONSUMPTION and your assumption that all INFLATION is driven by the U.S. consumer is flawed. The conundrum for the FED exists between the abyss of supporting a DEGRADING U.S. DOLLAR and trying as you suggest, to control U.S. inflation at the expense of the average U.S. citizen, when we are the tail of this snake, not the head. U.S. INFLATION is more a function of global export of inflation by net producing countries and the carry trade paas-thru of consuming debtor nations, like the U.S.A. Your analysis is flawed, your thesis is limited in perspective, thus your evaluations of the top down problem go understated and your conclusion disfunctional. please review the U.S. DOLLAR INDEX, PLOT CRUDE VS. GOLD SPOT MARKETS, THEN, PLOT GOLD/CRUDE VS. THE U.S. DOLLAR and then my presentation begins to compel your reconsideration. Our Marketocracy Fund called going long GOLD at 4:00 a.m. recently as GOLD SPOT, EUROPE spiked up 2.50 U.S. amidst the EURO CREDIT LIQUIDITY PANIC as ECB called for the FED to inject liquidity. Later that day in U.S. market trading, gold was up over 12.00. The trend remains in tact. THE POINT IS, BY VIRTUE OF INJECTING LIQUIDITY, THE FED IS ADDING DOLLARS, PRINTING MONEY, CREATING THE VERY INFLATIONARY SPIRAL YOU ARGUE AGAINST. Step back, take an overall top to bottom re-appraisal of the dynamics involved. IT IS BY FAR MORE COMPLEX THAN U.S. CONSUMERS DECIDING TO PAY MORE FOR GOODS AND SERVICES DUE TO THE PERCEPTION THEY HAVE MORE WORTHLESS DOLLARS AVAILABLE TO THEM. You will be unable to control the excalating food costs being passed thru or the demad driven energy pricing strip, a global factor, not a U.S. Consumer controlled function. Time for voices to get real about the problems with which we deal. Regards, hgc, aka extremebricknmortar