Thursday, February 19, 2009

Inflation on The Rise

As stated previously, my biggest fears with all these bailouts was the government losing its AAA rating and a spike in inflation. It now appears that the spike in inflation has started. Wholesale inflation took its biggest jump in six months. The inflation increases broken down by sector tends to be higher then predicted.

Ben Bernanke (Federal Reserve Chairman) dismissed concerns that the governments efforts to fight the economic crisis. He added that the Fed could act to reverse the trend after the marks rebound and the crisis has been dealt with. Bernanke said this would all happen before inflation became a problem.

Somehow this is not very reassuring to me. The government fixes are what is causing the inflation. The inflation has a dampening effect on the fixes. All the while there is this race of sorts. It is a race against against the ticking clock of inflation. Wait to long, inflation spirals out of control, and we will be facing a new crisis that will make us long for the "good old days" of the last crisis.

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