Glen L.

Credit Crisis Watch: Some Positive Developments

If the credit freeze-up thaws it will spark a bear market rally, but the resulting inflation caused by dumping all that money in the market will be very high. What benefit is there in stocks climbing, say, 40%, if inflation hits 50% or higher? Granted, we have never seen inflation rates that high in the US in modern times, but the Fed never doubled the money supply before, either. Right now the banks are sitting on the TARP funds, lending back to the Fed at rates below what they pay depositors, still afraid to lend in this environment; the Fed is desperate that they NOT start lending all at once, which will unleash the dogs of inflation.

Bernanke's tightrope walk continues. I'm betting he's gonna fall. Unfortunately, when he does the US dollar, and all of us, fall with him.