Do I Worry?--Nah!

I glanced at this Post of James Hamilton this morning, before I went to see my personal banker, who told me I would be paid only 3% on my renewing CDs; facing as I am escalating Costs in my own Consumption, I feel extremely comforted that the Fed are relaxed about further Rate reductions. I still believe I should restudy John’s Post, as it is always filled with amazing Insight. It seems that Core Inflation is near the high end of restraint levels, but would be capable of additional cheap liquidity. I felt almost Tears of Joy, recognizant that I would have to roll over future Certificates of Deposit in the near future. It appears that the Economy is structured well, except for a lack of cheap assessable liquidity, and could easily endure a combination of Price rises and lack of New Orders. There exists little complaint about anything other than a lack of ready Cash and raging Commodity prices. Only Mortgage-holders and End-Consumers elicit any temper tantrums, and good Economists try to deflect notice of such Spoiled Sports (pity that I am one of the later).

The New York Times tells Us that 8.8 million Mortgage-holders are underwater; a beautiful term for a Mortgage more expensive than the home it is based upon. The Reader should recognize that this state was created by a Housing balloon which burst, combined with a sponsored Consumer mentality (boosted by a greedy Banking community) that espoused a high-level of Mortgage Risk to create a Tax-Writeoff. The Bubble burst, and Mortgage-holders found they had to kick more into the Pot; in some Cases, more than the Tax Savings which were ever realized. The Zero-Down Bankers now blame the Mortgage-holders for the later’s fiscal irresponsibility. Indeed, there is incessant Demand by Bankers that the Federal Reserve and Government save them from the dastardly fiscal irresponsibility.

We should not worry, though, because Mark Perry assures Us that the monetary base grew only by 40%, instead of the 70% during the 1970s which was the last Period of Stagflation. I possess two Thoughts about this: the first being how the Eight year periods compare prior to the actual Start of the Stagflation, rather than to the period of Stagflation itself? The second Thought arises that the last Period of Stagflation exited without any reduction of funds in the monetary base (I may be mistaken, as I am simply Guessing), and current economic activities already contain the expanded monetary base of the first Stagflation Period. Until such time as I actually witness a 40% real economic growth (Product Expansion) in the last 7 years, I might be inclined to continue to worry. lgl