the boogeyman
This article scares me.
It talks about the possibility that the Fed may be cutting interest rates too much, and the threat of inflation. It’s the same stuff I was worried about before - I want to earn money on my savings, and I want my savings to have real purchasing power.
It’s funny - when I shopping this weekend - for eyeglasses, work clothes, gas, groceries, even at the fast food place outside the outlet mall - I was actually thinking, "There ya go, Sis, do your patriotic duty and support the economy by spending." ‘Cause really, isn’t this all the market wants? It wants us to spend, spend, spend. The more we spend, the higher the Dow goes, the less the Fed worries about recession, the higher interest rates get, and the higher my ING account will yield. That’s pretty simplistic, but that’s how I think about it. And since it seems that people are spending less, it’s going in the other direction - the Dow’s dropping, the Fed is worried about recession, and they’re lowering interest rates and my ING account will yield less.
Only thing is, it seems to me like it took a few stock trader temper tantrums to get the Fed to start cutting rates. For a second there last year, the Fed kept saying that they weren’t eager to cut interest rates, because they didn’t want inflation to rise. The Dow wobbled hard a few times (I understand that this is a very simplistic summary of how housing and credit problems hurt some stocks in a real way - remember, I’m not an economist, I just read stuff), and then the Fed’s story changed - apparently inflation was no longer a threat so much that the Fed had to hold rates steady. So the Fed cut the rates. Twice. But I believe the question remains - when should we start to worry about inflation? Surely the Fed can’t keep cutting rates and making money more plentiful without us facing some consequences at some point. I feel like somebody should be letting us know how close we are to that point. Inflation scares me. I just started making and saving more money and I don’t want inflation to make my gains worth less than they are. I don’t want to work harder for less. So when does inflation become a pressing concern again, and what do we do to protect our hard earned gains if inflation spreads beyond energy bills and gas for the car?
