re: #101 Ward Cleaver

Bernanke said today that the Fed would hold down inflation. The thing is, how? By cranking interest rates up to 20+ percent, like Volcker did in the early ’80s? Or by Obamanite smoke and mirrors, and spin?

I wouldn’t be too concerned about inflation for a while. The housing market has all but collapsed, and until prices there rebound it will act like a stone around the neck of the economy - and inflationary pressures. And with the enormous inventory of homes on the market at foreclosure prices, values aren’t going to rebound to normal levels for quite a long time, probably a few years. If spending can be contained to what’s been allotted in the current stimulus package - or less, if anyone can muster the balls to take back what hasn’t already been spent, which right now is about 90% of the allottment - the economy can probably absorb the borrowing underlying the stimulus over the next few years without undue inflation. And the Fed’s tools - raising interest rates and buying up Treasury securities - are extremely effective at dealing with the demand component of inflation. They are not as effective at controlling structural inflationary pressures - like spikes in oil prices caused by embargoes, for example - but they are probably sufficient to control the devaluation of the dollar caused by stimulus spending - if it doesn’t exceed what has already been done.

Also, if any of the upcoming budget boondoggles like nationalized health care pass, the confiscation of wages necessary to pay for such programs will depress any surge in consumer demand for goods. It could also prolong the recovery from recession by an awfully long time, but that will certainly serve to keep inflation in check.