Dimitris

Will the FOMC Raise Rates?

"Will they or won't they? That's the question du jour, at least with respect to today's FOMC announcement"

What are you smoking? The FED is NO position to raise rates. That wont until there are signs that the economy is recovering. NO SIGNS of that yet. In fact, the FED announced they are scared shitless for deflation.

"The Committee anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant."

Deflation on the Ski Slopes?

Kunst,

The problem this time is not liquidity, but instead it's insolvency. Regardless of how much money the Fed pumps, the banks are not lending to someone with shaky credit in this economy. Therefore, by the time the velocity of money reaches the market, disinflation will continue in consumer prices. The fear is that asset inflation (housing) will spread to other sectors, mainly the job sector. So, that is why unemployment is key as you say.

Deflation on the Ski Slopes?

One thing about this chart that I think is misleading ... is the "inflation-adjusted" part of it. This chart assumes that you believe the governments numbers for inflation, especially the last 10 years. I'm guessing the peak should be around 170 instead of 200. Either way, it's huge!