Well, well, well aren't we in an enigma! Doesn't this just sound peculiarly familiar what we are seeing in the US and the global economy, sure it does, reminds us of the era merely behind the terminology STAGFLATION in the 1970s, combining sluggish growth and surging INFLATION!
The FOMC minutes of the last meeting where the feds took rates down to 2.0% indicated clearly that the feds are insecure about inflationary levels and are in no place to lower rates further. They downgraded growth and upgraded their inflation projections, and that surprisingly added to the woes of the US dollar and did not at all support it like what was seen after the decision as market participants predicted the bottoming of the easing cycle.
Growth is to pick up in the second half of this year. That is still the testimony the Feds are holding on to, yet markets already know that and with $135 barrel of oil they see dues to be paid by the American economy as they are to enter the Stagflation Era with no redeemer; and according to the American history of monetary rule they will result to quick reversal to those rate cuts to take the economy into RECESSION before rising up once again and now that scenario is which once was thought the savior for the dollar it is instead its undertaker!
Inflation in the 1970s ear of OPEC rule was approached by the US administration with what is known by the Economic Stabilization Act of 1970 when the president became the Commander in Chief of PRICES, well surely the administration has assumed to take control is the same domineer but by actual military invasion of oil rich nations to secure their supply instead of going through the dilemma once again, yet the messers have become the messees, and now Bernanke is the one in the line of fire.
How is the economy to rise of its predicament, the stimulus if actually convinces consumers to spend that is more inflation, and when the economy adjusts to rising domestic demand still inflation will surge more disposable income at that point will be torn apart and wage increases will be prohibited to not fuel further price pressures, and there comes the more important pickle which is the HOUSING MARKET prices then if they bottom are supposed to rise but with that affordability problem and tight house hold finances are not going to spur them into properties buying mood!
So basically here is the conclusion. Inflation is the ruling power in nowadays economic balance. In the Euro Zone it's the one in charge surely in the United Kingdom it's threatening the stagflation phase as well and today we have data from both economies to weigh the effect. Britons are expected to have trimmed further their shopping sprees as sales are projected to have deepened the fall in April. As for the industrial direction in the Kingdom still at records low and expected with slight improvements on the back of abroad and not domestic demand. As for the single currency nation the industrialized nation is expected to have seen much more softening in that sector in March, as today Europe is taking the lead to add to the woes the surging crude has bestowed upon financial balance in markets and economies.
All are waiting for the knight in shining armor, and all people of the world are looking up to their central bankers and governments for redemption yet are they capable of handling the challenge? Bernanke is now out of ideas for the US and the world needs them to stabilize for no other reason but to secure financial markets stability and restoring of liquidity which has prompted their economies to their nightmares, while the feds now are using the old trick in the book the WAIT AND SEE approach so let's see what good that is going to bring us as we ponder upon the weekly unemployment claims for last week and suffer with the rest of the American public!!!
Crown Forex
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