Consumer Spending Vs. Inflation

Consumer Spending Vs Inflation

The current argument is, without consumer spending, America will be in huge trouble.

In doing so, the Feds have not cared about the inflation rate - they have lowered interest rates, invited sovereign wealth funds, liquefied the economy, lent paramounts of money out (shown by St. Louis Fed Chart ), reduced their balance sheet filling it with garbage that hobos won't take for a change.

Just to get people to spend more money.

But, fuel prices are high, commodity prices are booming, inflation is rampant, despite all the effort spent by government to lower it (as discussed in "Are we getting screwed..". Because of this, corporate margins are getting squeezed harder than Homer's chokehold on Bart - whatever the consumers are spending, corporations are losing in terms of margin.

Now, it's easy to connect those two, but would the latter (inflation) still have happened in a high interest environment? or did the Feds help?
For the first time, I am inclined to argue that the Feds did everything they could under circumstances for the better - yes lower rates might encourage inflation but the key rise in energy and food was not something that was engineered by the Feds. We always say the Feds don't have control over the economy or whatever (at least THESE DAYS) and whenever something fucks up, we always blame the Feds.

They aren't that important. They do what they do, and the economy will do what it does. When rules that got its writers Nobel Prizes gets broken few years later, it means there are no rules.

Interesting - I meant to write a piece to destroy the Feds, now I've just supported them. Feels weird.