Global Warming Examiner

What the Fed's Latest Decision Means for Investors

The economy is slow and inflation seems to be under control because bank lending is contracting due to their loan problems. When they have less money to lend, credit in the economy contracts. The Fed is doing everything it can to increase liquidity and get credit expanding again. They can print as much money as they need to fix the banks problems.

It really is a matter of timing. After the banks start expanding loans again, all this liquidity will cause an excessive amount of credit which will fire up inflation. It will be more difficult for the Fed to remove this excess liquidity once it is out in the economy without very high interest rates, reserve requirements. This excess liquidity being pumped into the economy now will be the fuel for future inflation, although it may be slow to show up because banks have not yet started to expand credit. It will eventually show up, by definition just when the bank credit problems look like they are getting better. Good article.

How the Fed's Decision Impacts You

Good Article. The Fed is clearly keeping interest rates low to bail out the banks. Inflation will eventually start to take up the price of assets like houses and then all the mortgages and lines of credit become good again.
Someone will have to pay for this. The government is effectively debasing our currency so people with savings, bonds, or fixed incomes will fare the worst. Owning real assets as the author described seems like good protection to me. I am currently looking for asset classes other than metals or oil that might offer protection from inflation. Was looking specifically at REITS. If anyone has on opinion on these, post an article or comment.