RE:RE:RE:Fed Hikes to continue with good jobs report. marketsense wrote: Excellent analysis Experience. Your common sense explanation is simple but also
factual. That said, I hope that the Fed isn't going to be the only tool used in
fighting inflation. It is too blunt and carries attendant risks that are prone to over
shooting. That time lag before the full effects are quantified is what worries me.
I like the idea of coupling the Fed with NOPEC. NOPEC composed of multi national
gov'ts forming their own trading bloc and negotiating contracts with OPEC as one
buying unit would change the whole dynamics of the competing bidding war
situation we have now, It would give the NOPEC bloc a powerful voice in negotiating
contracts with OPEC and I believe it would be very effective in keeping a leash on
them.
That all said, will anything really change as far as the structrual supply shortage that
exists in the oil market? I don't think it will. As soon as inflation drops, the Fed will
start backing off and demand will pick up. In a year or so we could be right back to where we are now.
Thanks for your kind words marketsense.
You are very correct that the tools the Fed and all central banks for that matter use are blunt tools and often take a long time before their effects are truly felt. Sadly, this requires patience which from my vantage point is sorely lacking.
Your hope that the there is more than can be done than just the Fed tools is a good one.
Actually there is lots others can do - especially Federal Governments. The problem that I see though is that most of them and especially the Biden Administration will likely do the opposite of what is required and make the situation even worse.
In simple terms, the economy is like a natural ecosystem which on the surface seems simple but is actually very complex. In a natural ecosystem if you monkey around with one thing, you create problems elsewhere. As Governments get biger and bigger the chances of them screwing up the economic ecosystem grows and with it bigger the potential impacts. Biden's multi trillion dollar political expenditure programs are a case in point.
See my next post for further thoughts....