Posted by With the current recession there is a whole lot of latent inflation building up – energy and food costs will likely be the first to increase.
Do you think the Fed will adequately control inflation in a 2% to 3% range, or will they continue low interest rates in the interest of promoting economic growth?
Is now a good time to be a debtor?
The answer for me personally is: I doubt it.
Contractionary monetary policy is never EVER popular. It is thought to have been a factor in the great depression… then you had Volcker enact 20% interest rates to reign in inflation. The consequence of that is a heavy stigma on the Carter administration til this day.
Right now, inflation is being kept down due to a low velocity in money… meaning money isn’t changing hands as much as it was. People aren’t spending or lending. Inflation will change if that ever increases once again. If it does, the responsible Fed would up the Fed Funds Rate, but they would never do it enough to offset it completely.
I also have to wonder how much more money will be held overseas as opposed to U.S. circulation.
Now is a good time to hold debt… not a good time to be a creditor.