What comes after the title…anyone…yes inflation.

I could not find an article, but Bloomberg has reported that the FED and the BoE have decided not to lower interest rates in order to combat inflation. The ECB also commented that they had no room to lower rates.

Not only do we have demand pull and cost push factors, but of course the increase of money supply has contributed to inflation.

http://www.investopedia.com/articles/05/012005.asp 

I might be going out on a limb here, but it would seem that Bernanke might have been to aggressive with interest rates. This reaction was of course to prevent widespread bankruptcies across the financial industries.

I say this after reading an article lost to the flurry of articles written.

http://www.nytimes.com/2005/10/25/business/25econ.html

At any rate, we can hopefully look forward to inflation not being created by the lowering of interest rates. Dealing with the other two factors is another question.

When reviewing all the factors, one of two things must happen. Either there will be a global slowdown that will eventually tame inflation or global growth will continue to create and fuel inflation. Either case leads to a period of stagflation or deflation. If left unchecked these situations can lead to deep recessions or even depression.

Very simply, investing is not a game, the market is indicating a hopeful end to the housing crisis and the liquidity crunch. If history serves as any reference then no matter what the scene was in history we consistently see time being a constant element.

Yes it is true that recessions have decreased in duration as history writes itself into the books, but time in regards to correcting dis locations in the market has not decreased. Many years ago economies had to react largely to what is occurring within its own borders. Today we must coordinate and react to what is occurring globally.

In conclusion it is really a dice roll as to where we end up. This is predicated by Greenspans recent comment that if analysts could be correct , with regards to prediction models, 60% of the time then we are doing a fantastic job.

So even though the markets are on the precipice of a full on break out you should tread very cautiously at what might be another high point in the market place. Employ risk management strategies to protect your down side.

 As I write this oil is breakingto new highs. Remember Bernanke said  last April that the FED expected inflation to subside, but that is the point: lots of things are said.

http://www.let.leidenuniv.nl/history/RES/Eco/evhgame2.html

GLT

by Green Writer