A little tough talk about inflation from Richard Hahn tonight:
Analysts representing the financial firms selling equity shares to the public spent the afternoon repeating their assertion that there is no inflation. Never mind the rising energy prices and CRB index. Never mind the rising long term interest rates. Never mind the solid precious metal prices. It was comical to hear the sell-side representatives sing in unison the ?inflation is dead? story. From this phenomenon, one should observe that inflation is the single, most feared factor terrorizing the sell-side people. If the existence of rising inflation were acknowledged, no one would buy high PE growth stocks and their reason for existence (and their big salaries) would cease. The Federal Reserve took the first step towards an interest rate tightening cycle, today. The purpose of a tightening cycle would be to extinguish the flames of inflation resulting from their own accommodative monetary policy, enacted since January 2001. The Federal Reserve's policy of massive liquidity injections and monetary stimulus (intended to bail out Wall Street) will result in conditions which will cause the Fed to burst the current stock market bubble, just like they were forced to do two years ago. This is a vicious cycle of market destabilization, which history will correctly attribute to the misguided leadership of Alan Greenspan.
AI
