Friday, December 14, 2012

Behind the Curve

The world looks just the same
And history ain' changed
'Cause the banners, they've all flown
In the last war
--The Who

In its announcement this week, the FOMC identified 6.5% unemployment as the level at which it would consider removing stimulus. Let's see, we have a chronically behind-the-curve institution eyeing a lagging economic indicator for evidence that it needs to reverse a massive money printing campaign.

We also know, from past incidents of hyperinflation, that general price levels tend to rip higher with little prior warning. Confidence in a currency does not erode, it collapses.

Given that set-up, it is likely that the Fed acts to reign in its easy money policy:

a) well before general prices take off
b) in early stages of general price increases, thus keeping further increases in check
c) after general prices are spiraling upward and out of control

Those not yet familiar with the Weimar incident should become so.

2 comments:

dgeorge12358 said...

On June 24, 1922, right-wing fanatics assassinated Walter Rathenauer, the moderate foreign minister who was in favor of adhering to the Treaty of Versailles, and also assured the population that Germany was not 'printing' too much money. From here on, inflation and social unrest, etc. really took off. Within a week, the mark was at 2,200 per pound from 1,400 three months earlier.
~nowandfutures.com

dgeorge12358 said...

German mark worthless (4+ Trillion marks per dollar) on November 14, 1923
~nowandfutures.com