Saturday, April 28, 2007
Inflation v deflation:
Near the end of the article: "Gold and silver bugs write in to say that the Fed will opt for hyperinflation over deflation, and that the precious metals will soar (and I've learned to never argue with metals bugs). I offer another opinion: That the United States Federal Reserve will elect to protect the dollar first (its primary legal responsibility), and take the same path it chose in the 1930's when it raised interest rates to prop up the dollar in the face of a deflationary depression. I also say that the real estate collapse and change in psychology will be too unwieldy to prevent a massive credit contraction, and that that contraction will render the Fed impotent."