RE:Got Gold ?Economic recovery challenges central banks | Kitco News My Comment: I think the Fed will choose inflation (ie "flation") over an economic and slowdown (ie "stag") and a stock market correction. Got Gold ?
Excerpt:
The Federal Reserve and ECB are caught between a rock and a hard place
Both the Federal Reserve and ECB are backed into a financial corner as they attempt to deal with inflationary pressures well above their expectation, coupled with slowing economic growth well below their expectations. The primary tool used by central banks to curtail rising inflationary pressures is interest rate hikes, the rock. However, while interest rates could undoubtedly dampen the inflation rate, it would also have an extremely detrimental impact on the global economic recovery, the hard place.
Neils Christensen, Editor at Kitco News, correctly quoted Thorsten Polleit, Chief Economist of Degussa Goldhandel GmbH, to explain the dilemma that currently plagues the Federal Reserve and ECB.
“It should be clear that a monetary policy of interest rate hikes and containment of credit and money supply expansion would be tantamount to an earthquake for the global economic and financial system – because the latest economic recovery has been driven by extremely low interest rates and a most generous supply of credit and money. If central banks meant business and were to combat price inflation by raising interest rates back to ‘normal levels,’ a recession-depression would be inevitable.”