A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi Toof, Re: Interest Rates and Inflation..................

I don't believe the FED has any desire to let natural Supply/Demand forces determine short term interest rates. This then creates the disconnect you are seeing. It's very rare that ST rates are below the CPI All Urban inflation rate - except for recent times. From 1982 to Present inflation has been higher than the 13 week Treasury rate only 15% of the time. Almost all of that has been since the start of the New Millennium. 26% of the time since January of 2000 the CPI inflation rate has been higher than st interest rates. All but a few weeks of the last 10 years interest rates have been below inflation.

There was a change in FED thinking about inflation and money's yield that occurred sometime after the Dot Com bubble and it persists today. This has been to the detriment of all savers and retirees on fixed income. FED salaries should be adjusted downward by the CPI inflation rate just to get their attention.

Tom