Re: A Weak Dollar Feeds Inflation

Gary wrote:
On Fri, 29 Feb 2008 02:43:05 -0700, "mg" <mgkelson@xxxxxxxxx> wrote:

Falling dollar fuels inflation fears in U.S. government bond market
By Deborah Finestone Bloomberg News
Published: November 14, 2007

<snip>

Rather than raise its target rate for overnight loans between banks, policy makers cut borrowing costs twice in the past two months, to 4.5 percent from 5.25 percent, in order to keep the economy from falling into recession. Lower rates gave traders more reasons to sell the dollar, spurring inflation.

The outlook for prices is "subject to important upside risks" from crude oil, commodities and the weaker dollar, the Fed chairman, Ben Bernanke, said in testimony last week to the Joint Economic Committee of Congress. "These factors were likely to increase overall inflation in the short run and, should inflation expectations become unmoored, had the potential to boost inflation in the longer run as well."

I saw a guy on CNBC yesterday who got me to thinking about possible
economic scenarios.

The Fed will do ANYTHING to make sure we don't fall into recession.
That means it will allow inflation to grow while it cuts interest
rates. It was pointed out that -- win or lose in that direction --
by the end of 2008, we will see significant inflation. At that
point the Fed will have to raise rates to combat it.

How to play this scenario as a retired person seeking to maximize
income for the future ?

Between now and July , I will take small - short term positions in
the market in order to capitalize on upward market thrust should the
Fed have any success. By Fall I will attempt to be all cash and
then go to short term US Government bonds. By the end of the year,
we will see high interest rates with the Feds attempt to curb
inflation.

That should happen unless the Fed is totally remiss in their
responsibility to stop inflation.

Any critiques ?

There are two things that the government is likely to do to reduce the national debt, lacking the courage to balance the budget, raise taxes, or end the unfair trade agreements. That is to allow inflation, lower interest rates and allow the dollar to devalue. Presto, effectively reduced national debt.

Will the next administration have the strength and support of the American public to avoid this temptation? I hope so, but I honestly don't know.

How does a retired person protect themselves? I don't see any easy solutions. About two months ago, I asked two reputable companies to recommend a conservative investment plan for me. I just reviewed how both recommendations would have fared if I had taken them up on it and, guess what, both lost money. I don't think the so-called experts know what to do either. At least I avoided paying a management fee. So, I'm still mostly on the side, living modestly, out of debt, and only protecting myself against inflation.
.

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  • Re: A Weak Dollar Feeds Inflation
    ... policy makers cut borrowing costs twice in the past two months, to 4.5 percent from 5.25 percent, in order to keep the economy from falling into recession. ... Lower rates gave traders more reasons to sell the dollar, spurring inflation. ... we will see high interest rates with the Feds attempt to curb ... So, I'm still mostly on the side, living modestly, out of debt, and only protecting myself against inflation. ...
    (soc.retirement)
  • Re: A Weak Dollar Feeds Inflation
    ... policy makers cut borrowing costs twice in the past two months, ... "These factors were likely to increase overall inflation in the short ... we will see high interest rates with the Feds attempt to curb ... As we say, "When the price of living gets too high, you have to cut ...
    (soc.retirement)
  • Re: A Weak Dollar Feeds Inflation
    ... Lower rates gave traders more reasons to sell the dollar, spurring inflation. ... the market in order to capitalize on upward market thrust should the ... we will see high interest rates with the Feds attempt to curb ... There are two things that the government is likely to do to reduce the national debt, lacking the courage to balance the budget, raise taxes, or end the unfair trade agreements. ...
    (soc.retirement)
  • Re: A Weak Dollar Feeds Inflation
    ... policy makers cut borrowing costs twice in the past two months, ... "These factors were likely to increase overall inflation in the short ... the market in order to capitalize on upward market thrust should the ... we will see high interest rates with the Feds attempt to curb ...
    (soc.retirement)