The Bailout: Part 2

dstark
Wed, 12 Sep 2007 15:36:56 +0000

Well, it looks like we are choosing inflation and a bailout over a little short term pain.

Oil prices hit a new high today. Food prices are accelerating upward at the fastest rate in over 26 years. Gold prices are making yearly highs. The dollar is declining all over the world.

Looks to me like we are committing ourselves to a lower standing of living in our future.

Martin Feldstein, a notable economist, wrote an op-ed piece in the Wall Street Journal today pushing for the Fed to lower rates a point.

I think he is insane. He wrote that our Fed Funds rate of 5.25% was very high historically because historically our real rate is 2%. In the same article he said our inflation rate ran 4.6% last quarter. I take the 2% real rate and add it to the inflation rate of 4.6% and I get a 6.6% rate.

It looks to me like our Fed is too loose. This is why we are getting inflation all over the place and the value of our dollar keeps dropping. This article also explains why we are in this mess. Our esteemed economists can’t add.

I hope our kids that are studying economics are learning how to add 2 and 4.6 and are also learning how to help our economy and not how to screw it up.