Eric Balkan

Do Rising Prices Indicate Inflation?

Jim, you've overlooked that the drop in housing prices is actually less than the increase in global stock prices. So that's a wash. The current credit squeeze is not a shortage of cash -- it's a shortage of trust. Banks won't lend to each other because they don't know how much toxic debt the other guy holds.
In any case, the money supply, which the Fed has been increasing by around 10-15% over the past couple of years -- estimating M3 -- does not include values of non-liquid assets. If we all owned a zillion dollars worth of land on the Moon, and the Moon was destroyed, wiping out our entire investment, that would still not be monetary deflation, i.e., a reduction in the money supply.
The Wash Post figured the cost of a Thanksgiving dinner this past Nov as being 11% higher than the previous year. Given, as Jim Rogers points out, a continued shortage of commodities, plus continued increases in Asian demand for fuel, that trend is unlikely to go away by itself.

Tax vs. Interest Rate Cuts

A tax cut is too broad a sword to use against an economic slowdown caused by rising oil prices, rising commodity prices, and a collapsing housing market.

The last time a major income tax cut was implemented, sales of Mercedes went through the roof. How does that help the US economy?

Increase taxes on the wealthy and pump that additional money directly into alternative energy companies (but not corn-ethanol), into helping people make mortgage payments, into providing health care for those who don't have it.... Stimulate the economy by increasing spending here in the US, not by giving money away to people who are going to send it overseas.