Thursday, May 24, 2007
US Policies Promote Inlfation Despite Fed’s Rectoric
A readable article which suggests the US policy toward the dollar truly is disconnected between what ought to be in the country's interest and what current policies promote. Policies are promoting a weaker dollar and higher inflation; one idea why is Bernanke's desire to avoid deflation, see " ... the Fed is rather concerned that a credit contraction combined with high levels of consumer debt could create a Japanese-style deflationary spiral; to avoid having to deal with deflation, the Fed should induce inflation." Higher inflation will erode debts for the US - convenient. Will inflation come to the UK? If it does, will the MPC choose to erode debt too? Author is Axel Merk, a portfolio manager of the Merk Hard Currency Fund.