Random Thoughts April 20, 2011
The demand for pecans by the Chinese is driving the price of the nuts up substantially above prices just paid a year ago. Now this is hardly newsworthy, except that it stands for what is happening with inflation at a global level. Many macro economists are forecasting very low inflation for the
because of weak aggregate demand for the domestic economy. However world wide demand is becoming more and more of a factor in domestic inflation, just ask the person eating that pecan pie next to you. U. S.
We may well face the worst of both worlds, a high unemployment rate and rising inflation. The weaker dollar will certainly be a factor. In this case monetary policy will move towards raising interest rates, which of course will have little impact since it is not attacking the cause of the inflation. It will, however, reduce employment. Like many policy prescriptions by the “experts”, it will only make things worse.
A Gang of Six Senators is quietly working on a solution to the debt crisis. We say quietly, because they know and we know that as soon as they actually propose something the ideas will be dismissed by powerful political forces. Another name for the Gang of Six is “Useful Idiots”. Useful, because they give the impression of being serious about the deficit, idiots, because they may actually feel they can get a bi-partisan deal that includes raising taxes.