Larry Kudlow spoke to Jeffrey Saut of Raymond James, Vincent Reinhart of the American Enterprise Institute and David Goldman of First Things First Magazine last evening about the Fed’s moves and what really needs to be done to combat inflation (via Asia Times).
David Goldman explained his points further at Asia Times:
With bonds and gold soaring together, one may wonder: is this inflation, or deflation? Actually, it’s deflation, and the anticipation of a monetary response to deflation that won’t work. The more money the US government prints, the less effect it has, but the more it persuades foreign central banks (and investors generally) that they should allocate more of their portfolio out of the dollar. Given the extremely high level of the yen and the misery of the Euro, gold gets the spillover. But no-one expects the Fed’s easing to have much effect on the real economy, so everyone continues to buy bonds.
- 0:50 JS The first move after a Fed announcement is usually the wrong way.
- 1:30 JS IT offers great opportunity in stocks, as does energy, specifically the Alberta tar sands
- 2:15 VR The Fed feels inflation is too low for its mandate, and the Fed will seek to generate inflation. Dollar depreciation and commodity price increases will be sued to achieve this aim.
- 3:05 DG This amounts from stealing money from old people trying to retire and providing it to debtors. The only way to fight deflation is to restore employment.
- 4:05 DG “You can’t push on a string, you can only pull on it.” ObamaCare is costing way more than expected, and halting small business growth. This is now an obstacle to employment.
- 5:10 JS The profit explosion now is huge. It’s going to lead to CapEx expansion, and eventually employment. But government expansion is limiting that growth.
- 6:30 DG Capital intensive companies are going to benefit here; utilities, pipelines, DuPont. Companies that can borrow cheaply, re-invest, and re-finance. They will give out money to investors.
- 7:25 VR The next round of QE is already priced in.
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