jadziasman

The Fed Funds Target Rate Is an Exercise in Futility

Seems as if the Fed is deliberately trying to debase the dollar so that the general price level increases. The fear in D.C. and at major banks is the continuing problem with depressed home values, which will create havoc in 2010 and 2011 when the Alt-A's and Option ARM's reset. If the Fed is successful and its inflation strategy artificially increases home values enough to allow the mortgage holders to refinance, then the Great Recession can be finally put to rest.

The danger in this strategy is that interest rates are liable to be in the 7 to 8% range in 2011 making the mortgages unaffordable for those with high loan to value ratios or inadequate incomes to cover the higher payments.

Although inflation is never desirable, it might be the medicine needed at this moment in time no matter how bad it tastes.